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Understanding Adjustable Rate Mortgages
An Adjustable Rate Mortgage (ARM) is a home loan with an interest rate that can change periodically. This calculator helps you understand how your payments might change over the life of your loan.
What is an ARM?
Unlike fixed-rate mortgages, ARMs have interest rates that adjust based on market conditions. Most ARMs have an initial fixed-rate period (typically 3, 5, 7, or 10 years) followed by periodic adjustments (usually annually).
Benefits of Using This Tool
- Compare payment scenarios - See how your payment changes after the adjustment period
- Plan your finances - Understand potential future payment increases
- Make informed decisions - Determine if an ARM is right for your situation
- Free & no signup - Access premium mortgage analysis without cost or registration
When to Consider an ARM
ARMs can be beneficial if you plan to move or refinance before the adjustment period begins. They typically offer lower initial rates than fixed-rate mortgages, which can mean significant savings during the initial fixed period.
Important Considerations
While ARMs can save you money initially, it's important to understand the risks. Your payments could increase significantly after the initial period. Always consider your ability to afford higher payments in the future and evaluate caps on how much your interest rate and payment can increase.