Adjustable Rate Mortgage or ARM

This is a mortgage that is chosen due to cheap up front payments.

The ARM payments can move up or down if over all rates move up or down.

This is one of the reasons for the trouble the banking industry is in now, People who could not afford a fixed rate mortgage chose the ARM option then could not make the payments after the rate and their payment went up later.

This is a poor choice for your Mortgage, you should never chose this option unless you are sure you can afford any increase in payments that could come later. Payment increases can be substantial – be sure you understand this.

The rate of change is usually tied to a specified rate index that will be listed in your loan documents.

Be sure to read and understand all terms, ask lots of questions and make sure you understand the answers you get and how these terms can affect your payments later.