| The main attraction of adjustable rate mortgage | | | | whether to make a mortgage based on the ratio of |
| financing is that it is cheaper than fixed rate financing | | | | current income to monthly payment. |
| for the same size mortgage. This mean lower monthly | | | | The main drawback - The trade-off for low initial rates |
| payments and larger loan amounts for borrowers. | | | | is the risk of rates going higher in the future-much |
| Adjustable rate mortgages (ARMs) have been a | | | | higher. Many borrowers who run into this problem have |
| popular form of mortgage financing in recent years. | | | | to refinance, as Frank Nothaft, Freddie Mac's chief |
| These mortgages start out at low rates for a set | | | | economist points out. "But the wide proliferation of |
| period; then adjust along with the index to which they | | | | adjustable-rate mortgages originated in the past few |
| are tied. As interest rates go up, so do the monthly | | | | years that are nearing their first interest-rate |
| payments. | | | | adjustment provides borrowers an incentive to |
| The index to which the interest rate is tied varies from | | | | refinance into a lower-cost ARM or fixed-rate |
| lender to lender. The most common indexes are the | | | | mortgage." |
| rates on one, three, or five-year Treasury securities. | | | | Right for you? - Adjustable rate mortgage financing |
| Another favorite is the average cost of funds to | | | | make sense for borrowers who cannot qualify for a |
| savings and loan associations. To the index rate, the | | | | fixed rate mortgage large enough for the house they |
| lender adds a few percentage points called the | | | | want to purchase, or for those whose income is likely |
| "margin." | | | | to rise enough to cover higher payments in the future. |
| The main attraction - The main attraction of adjustable | | | | It would not be a good move for those who might |
| rate mortgage financing is that it is initially cheaper than | | | | move in the next few years. |
| fixed rate financing for the same size mortgage. Not | | | | Learn more about your mortgage financing options by |
| only does this mean lower monthly payments to start | | | | visiting Bad Credit Second Mortgage Now. The site |
| with, it means borrowers can qualify for larger loan | | | | also offers free mortgage quotes at today's most |
| amounts. That's because lenders sometimes decide | | | | competitive rates. |