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what is a arm loan

If you have an adjustable-rate mortgage, then you might want to review the terms closely because the low-rate party for these loans is over. Many homeowners have grown complacent the last 10 years,

Adjustable-rate mortgage sizes are vastly bigger than fixed-rate loans, as mortgage lenders use them as a means of getting people access to homeownership at the lowest price possible.

The difference between a fixed rate and an adjustable rate mortgage is that, for fixed rates the interest rate is set when you take out the loan and will not change. With an adjustable rate mortgage, the interest rate may go up or down.

A 5 year ARM, also known as a 5/1 ARM, is a hybrid mortgage. A hybrid mortgage combines features from an adjustable rate mortgage (ARM) and a fixed mortgage. It begins with a fixed rate for a specified number of years, but then changes to an ARM with the rate changing every year for the rest of the term of the loan.

The rate on your adjustable rate mortgage is determined by some market index. Many adjustable rate mortgages are tied to the LIBOR, Prime rate, Cost of Funds Index, or other index.The index your mortgage uses is a technicality, but it can affect how your payments change.

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Not all home loans come with fixed monthly payments. Here’s how adjustable-rate mortgages work, and why you might consider getting one yourself. Since most of us don’t have the cash on hand to pay for.

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An adjustable-rate mortgage, or ARM, is a home loan with an interest rate that can change periodically. This means that the monthly payments can go up or down.

An adjustable-rate mortgage (ARM) is a loan in which the interest rate may change periodically, usually based upon a pre-determined index. The ARM loan may include an initial fixed-rate period that is typically 3 to 10 years.

The 30-year fixed mortgage carries a monthly payment of $943 per month, while the ARM carries a payment of about $865. The smart thing to do might be to take out a 5/1 ARM but make monthly.