An adjustable rate mortgage, or ARM, is a mortgage loan subject to
changes in interest rates. When rates change, the monthly
payments for an adjustable rate mortgage increase or decrease at intervals determined by the lender. The change in the monthly payment amount, however, is usually subject to a cap.

There are several types of adjustable rate mortgages:

• Balloon Mortgage - Offers very low rates for an initial period of time (usually 5, 7, or 10 years); when time has elapsed, the balance is due or refinanced (though not automatically).
• Two-Step Mortgage - Interest rate adjusts only once and remains the same for the life of the loan.
• ARMS linked to a specific index or margin.

An adjustable rate mortgage has three main advantages over a conventional mortgage with a fixed term of 15 or 30 years:

• Generally offers lower initial interest rates.
• Monthly payments can be lower.
• May allow borrower to qualify for a larger loan amount.

An ARM may make sense if you are confident that your income will increase steadily over the years or if you anticipate a move in the near future and aren't concerned about potential increases in interest rates.

Reputable lenders will be happy to answer any questions you may have about mortgage loans including specific questions about an adjustable rate mortgage. The Internet is a good place to start searching for a mortgage loan because it's easy to find information on interest rates and to get free, no obligation quotes from several lenders.

Here are some recommended starting points:

Ameriquest
Ameriquest is America's leading direct sub-prime lender and a frequent advertiser both in print and on television. Fill out Ameriquest's fast
one-page prequal application for a free, no obligation mortgage or
refi quote.

Low Cost Lending
Fill out LowCostLending's easy one-page form and let up to four
lenders compete for your business. Over 10 million borrowers
since 1996. Free rate quotes — no obligation, no credit check.

Full Spectrum Lending
This member of the Countrywide family helps homeowners consolidate bills, lower monthly payments and get cash fast for their home's equity. Free, no obligation quote and quick one-page form.

The bottom line: Be sure to get a quote from several different lenders. Once you know what each lender has to offer, negotiate the best deal you can. On any given day, lenders and brokers may offer different prices for the same loan terms to different consumers, even
if those consumers have the same loan qualifications.

Don't be afraid to make lenders and brokers compete with each
other for your business by letting them know that you are shopping for the best deal!