Is an adjustable rate mortgage good for the long term?

An adjustable rate mortgage generally offers a low introductory rate that is designed to make the mortgage payments affordable. The low rate only lasts for a limited period of time. After the introductory period, the rate will then begin to fluctuate.

Adjustable rate mortgages are tied to a financial index. For example, the mortgage rate may be set at "prime" plus 2 percent. This means that the interest rate will be equal to prime rate plus an additional two percent. If the prime rates remain low, the adjustable rate continues to be affordable. However, if the prime rate increases sharply, the payment will become expensive.

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