2/28 Adjustable-Rate Mortgage (2/28 ARM)
Definition of '2/28 Adjustable-Rate Mortgage (2/28 ARM)'
There are a few things to keep in mind if you are considering a 2/28 ARM. First, you should be aware that the interest rate on your loan will be subject to change after the initial fixed-rate period ends. This means that your monthly payments could increase significantly, which could make it difficult to afford your mortgage. Second, you should make sure that you understand the terms of your loan before you sign it. This includes understanding the interest rate cap, which is the maximum amount that your interest rate can increase each year. You should also understand the payment cap, which is the maximum amount that your monthly payment can increase each year.
If you are considering a 2/28 ARM, you should carefully weigh the pros and cons before making a decision. While a 2/28 ARM can offer lower initial interest rates, it is important to be aware of the risks involved. If you are not comfortable with the possibility of your interest rate increasing significantly after the initial fixed-rate period ends, then a 2/28 ARM may not be the right choice for you.
Here are some additional details about 2/28 ARMs:
* The initial fixed-rate period on a 2/28 ARM is typically two years, but it can be shorter or longer.
* The interest rate on a 2/28 ARM is typically based on an index, such as the LIBOR (London Interbank Offered Rate).
* The interest rate on a 2/28 ARM can increase or decrease after the initial fixed-rate period ends.
* The interest rate cap on a 2/28 ARM is typically 2% per year.
* The payment cap on a 2/28 ARM is typically 5% per year.
If you are considering a 2/28 ARM, it is important to speak with a qualified financial advisor to discuss the pros and cons of this type of loan.
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