Apr 22 2011

What is an ARM loan?

Category: Real Estate

Answer:

ARM LoanAn ARM loan (also known as an adjustable rate loan or variable rate loan) is a type of mortgage loan with an interest rate that fluctuates based on a certain financial index. They are often thought to be riskier than a fixed rate loan due to potential payment fluctuations that may occur during the life of the loan. In exchange for exposing yourself to these risks, a bank will often offer ARMs to potential home owners with an initial interest rate that is significantly lower than that of a comparable fixed rate mortgage. The loan agreement will typically dictate how often adjustments will be made after the preliminary rate. ARM loans are often attractive during periods of falling interest rates.


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