Adjustable Rate Mortgage

The speaker provides an overview on the important facets to be aware of on an adjustable rate mortgage (ARM).  He talks through the index which payments are tied to, such as US treasury or LIBOR.  Understanding the terms of the interest payme

The speaker discusses the importance in understanding the differences between fixed rate mortgages and adjustable rate mortgages.  He provides an explanation to why people will select an adjustable rate versus a fixed rate.

The speakers suggests that banks are no longer looking to issue adjustable rate mortgages due to the delinquency rates and risks associated with borrowers who take these loans out.  ARM rates are not attractive because banks do not want to issue these loans.

The speaker provides a detailed overview of an adjustable rate mortgage and describes how you should be aware of payment shock.  He covers the basics of the ARM, including caps and floors

There are a few basic features of an adjustable rate mortage that you should be aware of in order to adequately evaluate the risk versus reward that is associated to an ARM.

Types of adjustable rate mortgages

There are three main types of adjustable rate mortgages that one can take out; they are Interest-only, Hybrid, and payment option ARMs.

An adjustable rate mortgage is a mortgage product which has an interest rate that changes periodically.  As opposed to a fixed rate mortgage which has the same interest rate for the life of the loan, ARMs typically have a period where rates are fixed (typically between 3 and 10 years), followed by a variable rate structure which is tied to a market index such as