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When you obtain a loan for your new home, you may select an adjustable rate mortgage.
While it might sound complicated, adjustable rate mortgage simply means that the interest rate applied to the principal balance of your loan is subject to change – or adjust – over time.
The frequency of the adjustment depends on the type of mortgage, but typically it happens once a year after the initial fixed rate term. For example, you might select a 7/1 ARM where it has a fixed rate for seven years, and then every year thereafter the rate adjusts to reflect the benchmark interest rate.
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