What can happpen with an adjustable- rate mortgage?

Answer 1

The most obvious thing that can happen is that your interest rate can rise and fall either monthly, quarterly, annually or in otherwise determined sets of years (5 years, 10 years etc). This can occur from the inception of the loan or can occur after an initial fixed rate period expires. These rate changes will affect the following:

1) Amount of payment applied to interest and principle

2) May affect total loan payment amount due

3) May affect total amount of time required to pay off the loan in some circumstances

The initial rate change after a fixed rate period is often the most drastic. All rate calculation terms should be analyzed and understood very carefully.