rate second mortgage, which may qualify as a second
mortgage loan, does not apply the same interest rate toward monthly payments
for the life of the loan. Throughout the life of that loan, the homebuyer's
principal and interest payment for adjustable
rate second mortgage loans will adjust periodically based on fluctuations
in the interest
For example, a lender of second
mortgage loans could offer a 30-year adjustable
rate second mortgage loan to a homebuyer at an initial 6.5% interest rate.
During an adjustment period for the ARM Mortgage loan, the market interest rate
could rise to 8.0%, resulting in a significantly larger interest payment. Similarly,
the market interest
rate could decrease to 6.0%, resulting in lower interest payments.
Adjustable Rate Second Mortgage FYI:
An adjustable rate mortgage, or ARM, is different from a traditional
rate second mortgage because the interest rate changes during the life of
the loan in accordance with movements in the index rate.
If you can take advantage of a low mortgage
rate when applying for a mortgage, then a fixed rate mortgage might be the
way to go. But there are many reasons to consider an adjustable rate mortgage.
rate second mortgages generally have lower initial interest rates than fixed
rate second mortgages and can end up saving you a substantial sum if rates
remain steady or continue dropping. And, since loan amounts are often dependent
upon the ratio of your current income to the cost of the loan's first year of
payments, an adjustable rate mortgage may mean a larger total loan than a fixed
rate mortgage. We suggest speaking with a mortgage
specialist who can look at your unique situation and help you discover whether
an adjustable rate mortgage is right for you.