There are basically six different types of ARM, adjustable rate mortgages, that you will see being offered by most lenders. Essentially they fall into 5, 7, or 10 year fixed rate options with the remainder of the term having a fluctuating interest rate. With each of these three fixed term periods, you can have a rate that adjusts either once a year or every 6 months. You will see these type of arrangements shown as 5/1, 5/6, 7/1, 7/6, 10/1, and 10/6. But this is only part of understanding an ARM loan. You will then see three additional numbers separated by backslashes. For instance, a 2/2/5 is a popular option. What this signifies to you are the product’s rate caps. The first number is the initial maximum rate increase, the second number is the subsequent adjustment cap and the final number is the lifetime interest rate cap. I’m Stewart Brown, a licensed Mortgage Loan Originator in Palm Springs, California here to simply topics in Real Estate and Mortgage Lending. Please, like, share, follow and subscribe!
