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Adjustable-Rate Mortgages (ARMS)
▪Also known as variable-rate mortgages. The initial interest rate is usually below that of conventional fixed-rate loans.
▪The interest rate may
change over the life of the loan as market conditions change.
▪There is typically a maximum (or ceiling) and a minimum (or floor) defined in the loan agreement.
▪If interest rates rise, so does the loan payment. If interest rates fall, the loan payment may as well.
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