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What is an adjustable rate mortgage?

An adjustable-rate mortgage is a home loan with an interest rate that can fluctuate periodically based on the performance of a specific benchmark. ARMS are also called variable rate or floating mortgages. ARMs generally have caps that limit how much the interest rate and/or payments can rise per year or over the lifetime of the loan.

What is an adjustable rate mortgage (ARM)?

What Is an Adjustable-Rate Mortgage (ARM)? An adjustable-rate mortgage is exactly what it sounds like: a mortgage where the interest rate changes over time. Contrast it against fixed-interest mortgages, where the rate stays constant for all 15-30 years of the loan term.

What is a fixed rate mortgage?

A fixed-rate mortgage comes with a fixed interest rate for the entirety of the loan. As such, your payments remain the same. An ARM, where the rate fluctuates based on market conditions. This means that you benefit from falling rates and also run the risk if rates increase.

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