Adjustable Rate Mortgage – Is it a Better Alternative?

June 26, 2009

Author: William M. Davis

What is an Adjustable Rate Mortgage (ARM)?
An adjustable rate mortgage is a mortgage loan whose interest rate varies according to the indices based on which the rates are determined. Where the interest rate varies your payment liability also varies accordingly. Any change in the index rates will call for a change in the mortgage loan rate. While determining the rate applicable for a mortgage loan a percentage called the margin is added to the index rate which is usually the cost incurred by the lender and his profit margin. Through out the tenure of the loan this margin rate remains …