Adjustable rate mortgages (ARM) often come with low initial interest rates, then the rate increases to a higher market rate set against some type of Fed index after the initial teaser period expires.

An ARM may be right for you if you plan on paying off the full loan in a few years or sell your home in the short period of time. Again, adjustable rate mortgages are for homeowners who plan on short term pivots.

The important aspects of the ARM is the index plus percentage that the lender adds to make a profit (called a margin), adjustment periods (avoid monthly adjustment periods).

 

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