This compared with days this year when the ARM start rates have actually been higher than ixed-rate interest levels. Even though the gap between the two products has widened, it's still not sufficient to attract most borrowers. There are no sure signs one way or the other, but for the moment interest levels are far lower than they have been for much of the past several years. Because a larger loan amount is outstanding, lenders have more risk and so interest rates are somewhat higher than for conventional financing. Because the interest rate changes, monthly payments can also rise or fall.
Most ARMs have annual and lifetime interest caps, and also annual and lifetime monthly payment caps.
Interest rates are calculated at a given percentage of the loan amount per year, say 7 percent annually. Thus if a loan interest rate moves from 6.60 percent to 6.65 percent, it has gone up .05 percent or 5 basis points. Be aware that the rates presented here may not reflect the rates for individual loan products at any given time, and that rates are constantly in flux. At HomeAdvisor . Written by Realty Times Staff Click here for a printer-friendly version of this article.