Understanding the index on an adjustable-rate mortgage

An ARM uses the benchmark index specified in the loan agreement, together with a margin, to calculate an adjusted interest rate, subject to the loan's caps and other terms.

Read your actual loan documents to identify the index, lookback date, margin, adjustment schedule and limits. Older online lists of indexes may not describe the terms of a loan available today.

Do not assume that an initial payment will remain unchanged. Ask for an explanation of potential future payments and compare them with a fixed-rate option.

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