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Adjustable Rate Mortgage and How They can Hurt You!An Adjustable Rate Mortgage, unlike a fixed rate mortgage, is a mortgage that has an adjustable interest rate based on the prime rate plus however many points the lender writes into their mortgage contract. If you don't know what an Adjustable Rate Mortgage is, you must learn as much about it as you can. You want to avoid these evil loans at all costs. An ARM (as they are better known as) is a 10, 15, or 30 year mortgage loan with a fluctuating interest rate based on a specified financial index such as Treasury securities. During the first year of your mortgage, your interest rate will usually stay at a fixed rate. After specified amount of time (usually a year), your interest rate will start moving with the terms of the mortgage and the current market. If interest rates are up, your interest rate will go up. If interest rates go down, your interest rate will go down. Most people are lured into an ARM due to their enticing "interest only payment plans" or "pick a payment" plans which allow the borrower more flexibility during rough financial times. Little do the borrower's know, they are headed toward worse financial times if they only make interest payments or don't pay a full mortgage payment each month.
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