Does the interest rate on my mortgage change over time?

Yes, the interest rate on your mortgage can and often does change over time. This is because most mortgages in California are adjustable-rate mortgages (ARMs). An ARM is an agreement between the borrower and lender that includes an interest rate that changes based on the movements of an index rate, typically the U.S. Treasury bill rate. When a borrower takes out an ARM, they agree to a certain number of years with a fixed interest rate followed by a certain number of years with variable rates. The fixed-rate period may be for as little as one year up to ten years. The variable-rate period may begin after the fixed-rate period and last for the remaining life of the loan. Once the adjustable-rate period begins, the interest rate on your mortgage goes up or down depending on the movements of the index rate. This means your monthly payments could be higher or lower depending on the index rate. Generally, when the U.S. Treasury bill rate goes up, the interest rate on your mortgage goes up, and when it goes down, your interest rate goes down. It is important to note that the movement of the index rate also affects the amount of money you owe. If the rate goes up, the amount of money you owe will increase over time, and if the rate goes down, the amount you owe will decrease. It is important to make sure you understand how your ARM works and review your mortgage loan documents carefully before signing them.

Related FAQs

What is the role of the mortgage broker in the mortgage process?
What documents are needed to obtain a mortgage?
What is an "assumption" mortgage?
What is the role of the Appraiser in the mortgage process?
What is a bridge loan?
Are there any special mortgage programs for low-income families?
What is a subprime mortgage?
What are the different types of mortgage loans?
What is refinancing a mortgage?
What is an FHA mortgage?

Does the interest rate on my mortgage change over time?

Related FAQs

Related Blog Posts