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4 Things To Know About An Adjustable Rate Mortgage
By The Good Greek


Trying to navigate finances when it comes to mortgages can be tough. You want to make sure you opt for the option that makes the most sense for your situation, but much of the information may be hard to find or downright confusing. This article will discuss the basics of what you need to know about an adjustable rate home mortgage.

What is an Adjustable Rate Mortgage?

An adjustable rate home mortgage is a type of loan that you can get from a bank in order to cover the cost of the house you want to purchase. The interest rate that you pay on that loan is able to change at any time, which is what gives this loan its name. You may have an initial period where your payments are lower, but after that, the payment amount may become more inconsistent.

Why Would People Want This?

One apparent reason why people would want this is the lower periods in their loan payments. As interest rates drop, so do their payments, and they end up keeping money in their pocket that month. There is also some protection offered in the form of caps which dictate how much a payment or rate can change.

Things to Watch for

One potential drawback to this type of loan is that as the interest rates change, so do your payments. This means that one month you could have a relatively low payment, and the next month your payment could be significantly higher. This can make it hard to figure out a safe number to budget for. The best way around this is to average your payments and always make sure you have that amount saved for your payment. If your payment is lower, throw the extra in a savings account.


You qualify for this type of loan much the same as you would for any other with one main exception. The lender is going to pay more attention to your ability to repay. There are sometimes large fluctuations in payments, and a lender is going to protect their investment by ensuring you are responsible enough to take this on.


As you can see, there are several things to learn about this type of loan. You need to make sure you are well-informed about this option before agreeing to take it on. The benefits are great, and the negatives are able to be managed if you take time to plan ahead.

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