Final answer:
The information on changes in the interest rate for an adjustable-rate mortgage (ARM) is found in the loan agreement or promissory note. This document will detail how the rate can adjust over time. Understanding these terms is crucial for knowing how potential market changes can impact monthly payments and total interest paid.
Step-by-step explanation:
Information regarding the changes in the interest rate of an adjustable-rate mortgage (ARM) would typically be found in the loan agreement or the promissory note. This document outlines the terms and conditions, including how the interest rate can change, the index that the ARM is tied to, the margin, the initial interest rate, the initial rate period, and the rate adjustment periods. It's important for borrowers to understand these terms as they will affect the monthly payment and the total amount of interest paid over the life of the mortgage.
An ARM is a loan used to purchase a home where the interest rate varies with market interest rates, often tied to an index such as the LIBOR or the Treasury Index. These loans can include inflation adjustments that cause the interest rate to adjust in accordance with changes in the inflation rate. Borrowers may initially receive a lower interest rate with an ARM compared to a fixed-rate loan, but they should be aware of potential increases over time.