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Adjustable Rate Mortgages Federal Reserve Pamphlet

Consumer Handbook on Adjustable-Rate Mortgages

Federal Reserve Booklet on Adjustable Rate Mortgages

Introduction 

Mortgage shopping worksheet

What is an ARM?

How ARMs work: the basic features

  • Initial rate and payment
  • The adjustment period
  • The index
  • The margin
  • Interest-rate caps
  • Payment caps

Types of ARMs

  • Hybrid ARMs
  • Interest-only ARMs
  • Payment-option ARMs

Consumer cautions

  • Discounted interest rates
  • Payment shock
  • Negative amortization—when you owe more money than you borrowed
  • Prepayment penalties and conversion
  • Graduated-payment or stepped-rate loans

Where to get information

  • Disclosures from lenders
  • Newspapers and the Internet
  • Advertisements

Glossary

Where to go for help

More resources and ordering information

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