General Question

UScitizen's avatar

When an ARM (adjustable rate mortgage) adjusts, does only the interest rate change, or is the balance re-amortized for the remaining period?

Asked by UScitizen (4273points) September 23rd, 2010

When an ARM hits the annual adjustment, the interest rate changes according to the index specified in the contract. What if the mortgagor has made additional principal payments since the last adjustment? Does the outstanding balance re-amortize for the remaining period of the mortgage?

Observing members: 0 Composing members: 0

1 Answer

Adirondackwannabe's avatar

ARMs reamortize out to the original length of the contract on the adjustment date. If you make extra principal payments the monthly payments will be reduced to maintain the same maturity date. I knocked over $100 off my monthly payment in the first five years of my mortgage by making extra payments.

Answer this question

Login

or

Join

to answer.

This question is in the General Section. Responses must be helpful and on-topic.

Your answer will be saved while you login or join.

Have a question? Ask Fluther!

What do you know more about?
or
Knowledge Networking @ Fluther