An adjustable rate mortgage is just that, adjustable; reflecting short
term interest rates in general. Your first year the rate is most often
fixed and tempting, as it is usually a couple of points below the
market percentage with a cap on how high it can go as well. So if you
have an ARM rate of 3 percent with a six point cap, your interest rate
can go as high as 9 percent. Within each year, the rate has limits or
margin as well, normally a rise of up to two percentage points. Make
sure you do the math for the top numbers in your situation and get any
and all rate information in writing.
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