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 payments and rate is critical; does the loan have negative amortization?  What are the caps?  How long is the rate fixed for?

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.