What info do I get with an adjustable rate mortgage (ARM) disclosure?


With an adjustable rate mortgage (ARM) disclosure you'll learn how the elements of your ARM are determined, how is the interest rate and your monthly payment going to change, and some bad case scenario may be included, as well. For example, if you are looking at a 5/1 ARM for thirty years, your interest rate, principal and payments may very well start with a killing rate of 4.375%, which should be below the prime rate by all chance, and stay at this rate for a 5-year period.

In an ARM disclosure, you will get the chance to notice that you start with a discounted interest rate, and after a while, when the set period finishes, a change date will arrive - your discounted rate will have ended and rate will adjust to the prime plus a margin. The adjustable rate mortgage (ARM) disclosure will reveal the annual and lifetime cap of the loan. For example, the ARM rate cannot get 5 or 6 percent higher that the start rate, and can't adjust more than 1 or 2 percent within a year (that will be the annual cap).

The ARM disclosure sheet should state how many days before a rate change becomes current you are entitled to a notice of interest rate change. The disclosure of an adjustable rate mortgage should also cite an example of upward accelerating rate adjustment - how your payments will change if the rate reaches the lifetime cap as quickly as possible.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
Was this Mortgage QnA helpful?
Not at all
  • Currently 2.9/5 Stars
  • 1
  • 2
  • 3
  • 4
  • 5
Add to this Answer

Mortgage QnA is not a common forum. We have special rules:

  • Post no questions here. To ask a question, click the Ask a Question link
  • We will not publish answers that include any form of advertising
  • Add your answer only if it will contrubute to the quality of this Mortgage QnA and help future readers
If you have trouble reading the code, click on the code itself to generate a new random code. Verification Code Above:
Bookmark and share this QnA: