How long is the initial interest rate period for adjustable rate mortgages?


The initial interest rate period will vary from 1 month to 10 years among lenders and particular adjustable rate mortgage (ARM) products, offered to consumers.

Starting Interest Rate Period for Interest Only Loans

Interest Only loans do not allow for negative amortization, therefore they may be preferred by some borrowers who may feel intimidated by Option ARMs. The starting interest rate period for interest only loans may reach 10 years.

Home equity lines of credit (HELOCs) sometimes have a long 5 or 10-year long draw period during which only interest is required to pay. After the initial draw period expires, the loan is rescheduled to fully amortize within 10 or 15 years.

Option and Hybrid ARMs and existing combinations of the two also offer the interest only option, together with minimum starting payment rate and fully amortizing options. The initial interest rate period for those loans is limited to several years, or until the loan is triggered to recast, when the negative amortization limit is reached.

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