Adjustable Rate Loans have an introductory period where the interest rate is lower than the standard rate loan. These loans can be for periods upwards of 10 years and are also known as variable rate loans. As with all loans you will find that the terms and conditions can vary between lenders and also the lenders will vary these terms and conditions between their customers. That is why it is very important to shop around for a loan that provides you with the most favorable terms.
The loan moves onto a regular schedule of interest rate adjustments after the initial introduction period has ended, this is called the adjustment period. The adjustment period can last up to as much as 4-5 years. In the adjustable rate period your mortgage is venerable to events that are outside of your control. The lender will move rates up or down (they are always quicker to move rates upwards and slow to move the downwards) based on a number of factors that include the increase in costs for them to borrow money, the cost of funds index, the official 12 month rate of the constant maturity bond or the London Interbank Offered rate. Continue reading ‘Adjustable Rate Loans’ »