February 22, 2005
Adjustable Rate Mortgage
Our mortgage calculator doesn't calculate adjustable rate loans. You might want to try another calculator (the advertising bar at the top usually has other mortgage calculators). Here's a brief explanation of an ARM.
The Adjustable Rate Mortgage (ARM) It is often referred to as an ARM. The interest rate charged on this loan is pegged to an index. If the index changes, the rate will change accordingly. The index could be pegged to the following: Treasury Bill Rates, The Prime Rate, Libor, 6 month CD rate and the average rate for loans closed, called the Federal Housing Finance Boards National Average Contract Mortgage Rate. The indexes are usually published in the newspaper.
The ARM initially offers low rates to attract people to this type of loan since the initial rate is low. From here, the rate could go higher. There are several components that go in to calculating an ARM.
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