What Is An Adjustable Rate Mortgage?
What is an adjustable rate mortgage? Well, an adjustable rate mortgage, also known as arm, is essentially a mortgage where after a certain period of time, your interest rate on your loan can go up or down, either twice a year or once a year.
So, for example, let’s say you have a two year arm or adjustable rate mortgage. Well, that means that if your interest rate at the time of closing on your new home is 7%, it’ll be seven percent for those first two years. But after that, depending on if your adjustable rate mortgage is for once a year or twice a year, during that timeline, your rate will go up or down. Now, is this a good idea? Well, it depends on your scenario, and you want to talk to your local mortgage banker, to see if that makes sense.
But essentially most people are going to want to refinance before the ARM period is up or during that timeline as well, and the interest rate is going to depend on the SOFR Index. So if you have any questions, please leave a comment below. Please share with anyone you think it’d be helpful to and as always, close with Patrice.
This has been “What Is An Adjustable Rate Mortgage?” by Patrice Henderson of Designed Living Real Estate. Be sure to subscribe to the Real Estate Educate channels for all your real estate tips and advice.
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