Host: What is an adjustable rate mortgage?

Jeff Thomas: An ARM is an adjustable rate mortgage and it means that your interest rate does your payment is not going to be fixed for the entire term of your loan. So you got have an arm for three years that’s fix for five years, seven years or ten years and all ARM’s unless otherwise stated you’re going to have amortization period of 30 years so after the end of that fixed period of three, five, seven or ten it’s going to — your loan and your mortgage payment or either you going to adjust upwards or downwards but there’s two key factors or components rather that make up an ARM. One is the index which could be LIBOR monthly treasury outreach, something like that and the margin and the margin is something that’s fixed and the best way to explain the margin is to lend their spread. They add your index plus your margin and that’s what we call you’re fully index rate.

So at the end of the fixed term of your adjustable rate mortgage your loan will adjust to the fully index rate. You’ll get a payment notice about 60 days prior to your loan reindexing to tell you what you’re new payment will be.