QandAs: Loans

What is a Convertible ARM?

Answer:
A Convertible Adjustable Rate Mortgage (ARM)

can convert from an adjustable to a fixed interest rate mortgage. The borrower must pay a fee within a specified timeframe for the conversion to occur.

The details of this arrangement will be spelled out in the mortgage loan documents. If you opt to convert your loan, the fixed interest rate will be slightly higher than the prevailing market rate, but your payment will stay the same for the remainder of the loan. This feature is designed to protect you from future spikes in interest rates.


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