VARIABLE (ADJUSTABLE-RATE) LOAN
Known as variable or adjustable rate mortgages (ARM’s) are loans whose interest rate can vary during the term of the loan. Your interest rate is based on a fixed margin plus a variable index, which fluctuates according to market conditions. Most can adjust every six months and have both a floor rate (the lowest rate you will ever pay and usually the start rate) and a life-cap rate (the highest rate you will ever pay; typically 5% over the start rate). There are also interim caps which limit the amount your interest rate can adjust during increments that are set by your note (usually a maximum of 2% every six months).
The interest rate you pay is based on a fixed margin plus a variable index
Most ARM loans adjust every 6 months
There are caps as to how much your rate can increase at any one time
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