What is that 2/28 of a subprime loan?

A 2/28 adjustable-rate mortgage (2/28 ARM) is a type of 30-year home loan that has an initial two-year fixed interest rate period. After this 2-year period, the rate floats based on an index rate plus a margin.

How does an interest-only ARM work?

An interest-only adjustable-rate mortgage (ARM) is a type of mortgage loan in which the borrower is only required to pay the interest portion owed each month for a certain period of time. This means that monthly payments must increase substantially after the initial interest-only period lapses.

Why is an adjustable rate mortgage ARM a bad idea?

Why is an adjustable rate mortgage (ARM) a bad idea? An ARM is a mortgage with an interest rate that changes based on market conditions. They are not recommended since there is increased risk of losing your home if your rate adjusts higher, and if you lose your job, your payment can become too much for you to afford.

Why is it called subprime?

The term subprime gets its name from the prime rate, which is the rate at which people and businesses with an excellent credit history are allowed to borrow money.

What is the benefit of an interest-only mortgage?

The main benefit of an interest-only mortgage is that your monthly payments will be cheaper. This means that you could potentially borrow more.

What kind of mortgage is a 2 / 28 arm?

A 2/28 adjustable-rate mortgage (2/28 ARM) is a type of 30-year home loan that has an initial two-year fixed interest rate period. After this 2-year period, the rate floats based on an index rate plus a margin .

Is it better to refinance with arm or fixed rate mortgage?

Any cellular/mobile telephone number you provide may incur charges from your mobile service provider. Refinancing to an adjustable-rate mortgage (ARM) typically provides a lower interest rate for an initial payment period, making the initial monthly payments less than what a fixed-rate mortgage refinance usually offers.

What’s the current interest rate on an ARM loan?

Today’s ARM loan rates Product Interest Rate APR 30-Year FHA Rate 2.770% 3.660% 30-Year Fixed Jumbo Rate 3.190% 3.300% 15-Year Fixed Jumbo Rate 2.440% 2.520% 7/1 ARM Jumbo Rate 3.650% 3.990%

What’s the difference between 2 / 28 arm and 3 / 27 arm?

Less common are the 2/28 and 3/27 ARMs. With the former, the fixed interest rate applies for only the first two years, followed by 28 years of adjustable rates; with the latter, the fixed rate is for three years, with adjustments in each of the following 27 years. In these cases, rates adjust semi-annually. 1