"Is there any way to benefit from the lower rates on adjustable-rate mortgages (ARMs) without risking payment increases I can't afford if rates increase sharply?" With interest rates on ARMs still attractively low but widely expected to rise, I hear this question often. Despite what you may hear to the contrary, you do not get payment certainty with the flexible-payment ARM, also called "1-Month-Option Arm," "12 MAT Pay Option ARM," "Pick a Payment Loan," "1-Month MTA," "Cash Flow Option Loan," and "Pay-Option ARM." This loan offers conditional payment certainty. Payments won't increase by more than 7.5 percent a year, provided that interest rates don't increase too much. How much is too much? That depends mainly on how low the initial payment is and how large a markup ("margin") the ...
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