Question:

Why take a 10-1 adjustable rate mortgage (10/1 ARM)?

Answer:

The 10-1 adjustable rate mortgage (10/1 ARM) is often sought by borrowers who would like to have the stability offered by a fixed rate mortgage but coupled with somewhat lower rates a 10/1 ARM usually offers.

The 10-1 adjustable rate mortgage is commonly tied to the 1-year T-Bill index. The 10/1 ARM rate is based on a predetermined margin between 2 and 3% on the T-Bill index. Normally, this type of ARM is offered with a 30-year amortization period, but also with 40 or even 50 year terms.

You need to ask the lender about the caps and the adjustment frequency of the 10-1 adjustable rate mortgage (10/1 ARM).

Many borrowers taking a 10/1 ARM will also consider an FRM for the same duration of the loan, but often the greater flexibility of ARMs added to a relatively long period of time with low monthly payments will make the 10/1 ARM a winner over the FRM counterpart.

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Common misspellings: mortage and morgage