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The Increasing Popularity of the Adjustable Rate Mortgage

  • October 12th

by UrbanTurf Staff

The popularity of the adjustable rate mortgage (ARM) is increasing following more than a decade of playing second fiddle to longer term mortgages. 

The Mortgage Bankers Association noted in a release Wednesday morning that the share of total mortgage applications for adjustable-rate mortgages is approaching 12%. At the beginning of the year, when rates for long-term mortgages were still low, ARMs represented just 3% of total mortgage applications. 

The biggest difference between an adjustable-rate mortgage and a fixed-rate mortgage is that with an ARM, your interest rate will change after a certain period, usually five or ten years. With a fixed-rate mortgage, your interest rate is locked in and your payment will be the same every month for the duration of the loan.

After an initial interest rate period, your lender will determine a new interest rate for an ARM, using calculations based on a measure of interest rates — like the constant maturity Treasury index or the Cost of Funds Index.

See other articles related to: adjustable rate mortgages

This article originally published at https://dc.urbanturf.com/articles/blog/the_increasing_popularity_of_the_adjustable_rate_mortgage/20188.

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