ARM – So today’s word of the day is adjustable rate mortgage or arm a r m defined as a mortgage in which interest rates periodically according to a corresponding fluctuation in an index, all arms are tied to indexes. So what does that actually mean? So what it is, is an arm is an adjustable rate mortgage means it can change. It’s not fixed.

There’s multiple types of mortgages, primarily being fixed and adjustable to use it in a sentence. If you have bad credit or you don’t qualify for a traditional loan, the lender might want to lower their risk and give you an adjustable rate mortgage as opposed to a fixed mortgage.

OK, so that defines that there are for you within an arm to come up with your interest rate. There’s going to be two components. There’s going to be the margin and then there is going to be the index. There can be various different indexes. Some of the more common indexes might be like the LIBOR or there’s like all types of ones that you can find out there and they’ll track specific indexes.

Then there’s going to be the margin. That’s a percentage that the bank makes on it. They will take that index plus the margin. They will add it up and that becomes your rate. It will adjust from time to time, could be monthly, could be annually, could be any different type of terms. You can look and find some more details on that one. There is a floor on arms, so there is a minimum in which you can go down.

I have a sentence for an adjustable rate mortgage.

Unless you have disposable income. Seeking an adjustable rate mortgage is scary. Don’t do it.

Yes, unless you have extra disposable income, lots of discretionary spending

Money and you know, it’s for a very short time then.

Ok, that’s one real word, it’s defined at the bell.

Episode Links

LIBOR , mortgage

Episode Recorded Live on YouTube 3.25.21

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