You are about to purchaseyour first home and receive an advertisement regarding adjustable-rate mortgages (ARMs). The interest

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You are about to purchaseyour first home and receive an advertisement regarding adjustable-rate mortgages (ARMs). The interest rate on the ARM is lower than that on a fixed rate mortgage. The advertisement mentions that there would be a payment cap on your monthly payments and you would have the option to convert to a fixed-rate mortgage. You are tempted. Interest rates are currently low by historical standards and you are anxious to buy a house and stay in it for the long term. Why might an ARM not be the right mortgage for you?

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Money Banking and Financial Markets

ISBN: 978-0078021749

4th edition

Authors: Stephen Cecchetti, Kermit Schoenholtz

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