How Do ARMs Work for Mortgages?

Series Summary

A mortgage is the pledging of a property to a lender as a security for a mortgage loan. While a mortgage in itself is not a debt, it is evidence of a debt. It is a transfer of an interest in land, from the owner to the mortgage lender, on the condition that this interest will be returned to the owner of the real estate when the terms of the mortgage have been satisfied or performed. The mortgage is, thus, a security for the loan that the lender makes to the borrower. In most jurisdictions, mortgages are strongly associated with loans secured on real estate. In this free video series, a licensed mortgage broker provides information on mortgages, how mortgage companies work and how to make mortgage calculations. Discover how mortgage points and rates work, how to assume a mortgage and how to get a second mortgage. With this financial advice, getting a mortgage on a house won't seem like such a scary proposition.

Video Transcript

"Hello today we are going to be talking about adjustable rate mortgages or teaser rates. Hi my name is Adriel Torres I'm the owner of ultimate credit today dot com. Adjustable rate mortgages are a type of mortgage where they are fixed for a certain period of time then they adjust. They are usually fixed for about a year or two and then they adjust every six months. They also have what is called caps, basically there are three numbers associated with that. Three, one, seven let's say for example. The first number three is how many points it can adjust after the first adjustment period. One which is the minimum numbers, how many more points it can go up. And finally the seven is the ceiling cap so assume you start off with a seven percent mortgage and adjust in the first period up to three percent it can go up to ten so now instead of it being seven it is now ten. Obviously your mortgage payments go up then the next adjustment period can go up to another point which potentially can go to eleven percent and the lifetime cap or the ceiling which is the last number is seven so the maximum it can go up to is fourteen. Hopefully by that time you have gotten another mortgage and gotten yourself into a fixed thirty year mortgage and that's what an adjustable rate mortgage basically are. Thank you so much and remember get yourself a fixed as soon as you get done with your first initial fixed payments. Thank you."