What's Behind the Change?

If your current home loan is an Adjustable Rate Mortgage (ARM) it likely offered a lower interest rate than what would have been available with fixed interest rate options at the time it was originated. This lower initial rate allowed you to:

  • Increase the amount of money you could borrow.
  • Make a lower monthly payment than would have been the case with a fixed rate mortgage.

There are many different types of ARM's, each of which offer an initial interest rate that is scheduled to change periodically. The initial rate can be fixed for a term ranging from 6 months to 10 years. At the conclusion of that term, the rate can adjust based on current market conditions.

The closing package you received details the specifics of your ARM. It will tell you of how much your rate can increase (or decrease) and whether it includes annual and lifetime limits on potential increases, also known as "caps."

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