| Lenders designate Adjustable Rate Mortgages with a | | | | place called an "inversion" where short term interest |
| series of numbers. You will see loans designated 1:1, 3:2 | | | | rates go up faster than long term interest rates. When |
| or even 5:1. These numbers tell you the number of | | | | this happens Adjustable Rate Mortgages can have |
| years your mortgage will have a fixed rate and how | | | | higher rates than long term fixed interest rate |
| frequently after that your interest rate will be changed | | | | mortgages. Market inversions are rare; unfortunately, |
| after that. For example a 1:1 mortgage carries a fixed | | | | the year 2006 started with this interest rate "inversion." |
| interest rate for the first year. After the first year your | | | | The danger to consider with an Adjustable Rate |
| interest rate will be recalculated every year. | | | | Mortgages is the risks associated with these loans. |
| Before selecting a mortgage with an adjustable | | | | Your interest rate could go up during unfavorable |
| interest rate to finance your home you need to | | | | market conditions. When this happens your monthly |
| understand the risks associated with these loans. If | | | | payments will go up as well. When your payments go |
| you fail to consider the risks you could find yourself | | | | up you could find yourself unable to manage the |
| with an unmanageable mortgage payment once your | | | | mortgage and you could potentially lose your home to |
| loan begins adjusting. | | | | foreclosure. |
| In most market conditions adjustable rate mortgages | | | | If you are uncomfortable with this risk you should steer |
| loans offer lower interest rates than traditional fixed | | | | clear of Adjustable Rate Mortgages and stick with a |
| interest rate loans. There is a condition in the market | | | | traditional fixed rate mortgage loan. |