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Adjustable rate Mortgages or ARMS,Typically start out at lower rates than the standard 30 year fixed rate loan.  In the current money market (2006) short term rates are rising to the point of being as high or higher than long term rates.   Economist call it an inverted yield curve.  Bottom line -- It is better to stick with a fixed rate unless you  know you will selling or refinancing before the first adjustment takes place.

Questions to ask: What are the interest rate"caps"? The cap is the limit on how much a rate can be adjusted. Typically not more than 2 % at the adjustment. There is also a"lifetime cap", usually the rate cannot go more than 6% over the initial rate. Also is important to determine the"index". When the adjustment is made the index is the indicator that you ad the 2% cap to. The index may be one year treasury bills, or the 7th district cost of funds. The former being more volatile the the latter.
Norm Terapak

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Terapak Realty & Mgmt., Inc.
1693 N. Humboldt Ave.
Milwaukee, WI 53202


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