What is an adjustable rate mortgage (ARM)?

An ARM, short for “adjustable rate mortgage,” is a mortgage in which the interest rate is not fixed for the entire life of the loan. The rate is fixed for a period at the beginning, called the “initial rate period,” but after that it may change periodically based on movements in a specified interest rate index, as agreed to at the inception of the loan. ARMs differ from fixed-rate mortgages (FRMs) in that the quoted rate for a fixed rate loan holds for the entire life of the mortgage. Some ARMs allow interest-only payments during the “initial rate period” or sometimes beyond. When referring to a fixed or adjustable rate mortgage, this only pertains to the principal and interest on the loan. If you have an escrow or impound account, your payment will fluctuate based on items contained within escrow.

What is an escrow or impound account?

An escrow account (sometimes called an impound account) is set up at closing by your mortgage lender for payment of certain property-related expenses on your behalf, such as large annual or semi-annual bills like property taxes and homeowner’s insurance. Part of your mortgage payment is held in this account so that the mortgage lender can use it to pay these expenses when they are due.

How can I contact the credit bureau agencies directly?

Calling the credit bureau agencies to speak with a customer care representative is one of the easiest ways to get help with your credit report concerns. Below is a list of contact numbers and website addresses for the 4 credit bureau agencies we report to:

How can I calculate my loan-to-value (LTV) ratio?

To calculate your LTV, divide your current principal balance by the original value of your home (expressed as a percentage). Original value is defined as the contracted purchase price or the original appraised value of your property at closing, whichever is less.

Example:

Purchase price:

$100,000

Original appraised value:

$150,000

Current loan balance:

$90,000

90,000 / 100,000 = 90% LTV