Adjustable Rate Mortgages
Adjustable rate mortgages are a type of mortgage loan. Interest rates for these loans periodically change, or adjust, depending upon multiple indexes. Typically, lenders determine the adjusted rate of the loan based on a variety of indexes.
Common indexes used to adjust the rates include Constant-Maturity Treasury (CMT) securities, the Cost of Funds Index (COFI), and the London Interbank Offered Rate (LIBOR). However, the change in monthly payments for adjustable rate mortgage loans is usually subject to a cap.