Adjustable-Rate Mortgages

Adjustable-rate mortgages (ARM) are know as flexible-rate mortgage, has an interest rate that increases or decreases during the life of the loan. When mortgage rates were at record highs, many people took out variable-rate home loans, expecting rates would eventually go down. ARMs usually have a lower initial interest rate than fixed-rate mortgages; however, the borrower, not the lender, bears the risk of the future interest rate increases. In the next post we'll look at the terms rate cap and payment cap.