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How does arm loan work?

Jodi Brooks

in Student Loans

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Timothy Norman on January 15, 2018

ARM loans or Adjustable Rate Mortgages begin for a number of years (usually 3, 5, 7 or more) with a fixed rate that does not change. Then, the rate will become a variablend change every month, or every six or 12 months. The variable rate is based on a mortgage index of the LIBOR, CMT, T-Bill or COFI, which are the most common, and a margin. The margin is added to the index, then usually rounded to the nearest 1/8 (one eighth) of a percentage point. All the rules about how the interest rate changes, are written on an Adjustable Rate Mortgage Note or Adjustable Rate Rider.


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