Colorado Mortgage Tips

A lot of people like the idea of the adjustable rate mortgage (ARM). Often the adjustables feature a lower payment than a fixed rate loan because the lender is shielded from increasing interest rates. But there's something you need to be on the lookout for.

When comparing different mortrgage proposals pay attention to something called the Adjustment Rate Cap. The Adjustment Rate Cap is the maximum amount your interest rate can change whenever the loan resets the interest rate.

For example, let's say you have an adjustment rate cap of 2%. Let's say your current interest rate is 5%. When your ARM readjustment occurs the new rate cannot exceed 7% (5%+2%) nor can it fall lower than 3% (5%-2%).

Pay attention to this adjustment rate cap to minimize disruptions when your adjustable rate mortgage resets.