A fixed Rate Mortgage is a mortgage that’s interest rate does not change during the life of the loan. This type of mortgage is one to consider if the interest rates are low. You can count on that low interest rate never changing.

An Adjustable Rate Mortgage (ARM) allows the lender to adjust the mortgage’s interest rate based on changes in the market. When the rate changes depends on the terms of your loan agreement. Some Adjustable Rate Mortgages start with a fixed rate and changes into an Adjustable Rate after a few years. This is called a fully amortizing adjustable rate mortgage. There is also an Interest Only ARM. With this type of ARM you would only pay the interest payments monthly, however, you will have a balloon payment at the end of the loan. With an ARM the lender will usually come with a “cap”. A “cap” will limit the amount the lender can raise the rate.

This entry was posted on Wednesday, June 25th, 2008 at 8:01 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.