Hi everyone. Thanks for downloading the Money Girl Podcast. I'm Laura Adams the Money Girl Podcast. I'm Laura Adams, the author of Money Girls Smart Moves to Grow Rich.

You can download two chapters from the book for free when you visit my blog by the same name, Smart

Move to Grow Rich.com.

Buying a home is one of the biggest financial decisions you'll ever make.

Not only do you need to choose a property that's a good fit for your lifestyle, but you also need to choose the best mortgage.

In this episode, you'll learn important features of adjustable rate mortgages,

so you'll know if it's the right loan for you.

Mortgages can seem pretty confusing,

but when you boil them down, there are just two main types, adjustable rate and fixed rate.

Fixed rate mortgages are pretty straightforward because the interest rate and monthly

payment never change, no matter what.

Adjustable rate mortgages or arms are more complicated because the interest rate can adjust or change periodically.

That means you have to consider the maximum amount an arm payment could go up and if you could afford the increase.

Additionally, there are several different types of arms.

To know the issues that an arm borrower could face, let's get

under the hood of these products so you understand how they work. Here are

seven important features of adjustable rate mortgages.

Feature number one, the Index.

The reason arm interest rates fluctuate is because they're linked to a common index, such as the London Interbank

offered rate or LIBOR or the monthly Treasury average. If the index moves up,

your interest rate generally increases, which means you have to make higher monthly payments.

On the other hand, if the index drops, your payment typically goes down.

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