Basics
An adjustable rate mortgage is typically a loan that is:
- fixed for a certain time frame
- adjustable after the fixed period is over for the remainder of the loan
The interest rate on a mortgage will typically adjust based on a predefined interest rate index.
Many mortgages have a lifetime total cap on their interest rate. This is the maximum interest rate over the life of the loan. Mortgages may also have have periodic caps, such as a maximum rise in the interest rate over a given period of time. This type of feature is to keep the interest rate from changing too fast.
Measuring Your Risk
You can figure out your maximum interest rate risk by using an online mortgage calculator.
The mortgage calculator will help you figure out what your maximum possible payment could be.
You will need to factor in your loan amount, interest rate, and loan term.
A Risk Example
A $460,000 mortgage:
- 7.5% interest rate
- 30 year loan term
- monthly payment $3,216
- 11% interest rate
- 30 year loan term
- monthly payment of $4,381
There are many free mortgage calculators available online to help you figure this out.
We've got all the help you need to get the best mortgage deal for you. Visit Our Main Mortgage Website.
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