Can My Monthly Mortgage Payment Change?

It might seem easy to be blindsided by hidden terms or mortgage agreements, but by asking insightful questions to protect yourself, you can join the millions who achieved their dream of owning a home.
Adjustable Rate Mortgages (ARMs) lock you into a low fixed rate for the first few years of your loan, after which your rate fluctuates with the market. By underpaying in the beginning of your new home loan, your dream of owning a home is now more reachable than ever.
More and more, homeowners are opting for adjustable ARMs instead of traditional fixed rate loans. They make it possible to afford a more expensive home; as your salary increases, you should be able to cover the higher payment later.
How Much Could My Payment Go Up?
In general, ARM mortgage interest rates are tied to an index rate and some percentage mark-up. This index rate is often a refection of the overall movement of interest rates. Therefore, the amount that your monthly payment could increase is not predetermined. In contrast, the percentage mark-up, or margin, is a fixed number added to that rate. For example:

Index rate (6%) + Margin (2%) = Your ARM rate (8%).
How Can I Protect Myself?
The best way to protect yourself from sky high rates is to know the terms of your new home loan. Is there an interest rate or payment cap in case something drastic occurs in the market? Are you protected against negative amortization or pre-payment penalties?

Even if you have a fixed-rate mortgage, you are not completely safe from payment fluctuations. Because of changing property taxes and insurance prices, your payment could also be subject to change.

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