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Flexible-payment adjustable-rate mortgages (FPARMs) are for borrowers who need low payments in the early years. The minimum initial payment is calculated at the interest rate in month 1, which can be as low as 1.25 percent, and rises by 7.5 percent a year. While the interest rate jumps in month 2, the initial payment holds for the year. In the four years that follow, each minimum is 7.5 percent higher than the minimum in the preceding year. The rate in month 1 thus determines the minimum payments for the first five years. Typically the payment will not cover the interest after month 1, resulting in an increase in the loan balance for some years. Under favorable conditions, the 7.5 percent increases in minimum payment over the first five years will suffice to pay off the larger balance and no larger payment increases will be needed. But there are no guarantees. If the increase in loan balance is too large, the borrower will receive a nasty surprise at the end of year 5: "payment shoc...