How adjustable-rate mortgages really move
Plan for the cap, not the hope
In brief
Your worst case is the initial rate plus the lifetime cap. Calculate the payment at that rate on the expected balance and ask whether you could afford it. If not, have a firm plan, such as selling before the first adjustment, and a fallback if the plan slips.
Last reviewed against the primary sources listed below.
Three questions
- Can I afford the payment at the lifetime cap?
- Can I afford the payment after the first adjustment cap?
- What if I cannot sell or refinance on schedule?
ARM questions
How much can an ARM payment go up?
Up to the payment at the initial rate plus the lifetime cap, reached gradually within the adjustment caps.