Mortgage Financing and Adjustable Rate Mortgages

Adjustable rate mortgages (ARMs) have been a popular form of mortgage financing in recent years. These mortgages start out at low rates for a set period; then adjust along with the index to which they are tied. As interest rates go up, so do the monthly payments.
The index to which the interest rate is tied varies from lender to lender. The most common indexes are the rates on one, three, or five-year Treasury securities. Another favorite is the average cost of funds to savings and loan associations. To the index rate, the lender adds a few percentage points called the “margin.”
The main attraction - The main attraction of adjustable rate mortgage financing is that it is initially cheaper than fixed rate financing for the same size mortgage. Not on View the rest of this article