Adjustable rate mortgages ARMs | Housing | Finance & Capital Markets | Khan Academy

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Finance and capital markets on Khan Academy: Most people buying a home need a mortgage to do so. This tutorial explains what a mortgage is and then actually does some math to figure out what your payments are (the last video is quite mathy so consider it optional).

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[briannahoff]

Thank you!! Why is this video so much better at explaining than the college I am paying thousands for?!?

[alfanton]

This is great video!!! I am going through my Real Estate course and I love how you explain everything. I am so glad I found your videos. So helpful!

[rs]

ARMs were a major factor in the 2008 market crash.

[matthewboddum]

This is not an accurate or complete analysis. The bank does not actually take on the risk in the fixed rate because they expect a bailout and have received a bailout from taxpayers in the past. Those bailouts encourage more risky lending. Borrowers can receive adjustable rate mortgages even if they know that, on their salary, they will not be able to make payments if the interest rates go up too much. This is a form of gambling. The risk to society is also ignored in this sociopathic analysis. If many people are on adjustable rate mortgages and there is a sudden interest rate hike (happening at the moment), many will not be able to pay and the house will go into foreclosure. This leads to family businesses closing, workers losing jobs, and a sudden loss of wealth for many people who had nothing to do with the private transaction. ARMs must be outlawed because they are economic time bombs.

[MichaelMantion]

I figured out around this time this video was uploaded that ARMS were actually a great deal, simply because rates have consistently gone down for the last 40 years.

[kakoi]

Amazingly done.
Thank you so very much

[Ru]

The FED control the market interest rate, who controls the ARMs interest rate? Thank you!

[fernandazotoduque]

With fixed rate you pay allways the same percentage, the first month you owe 50 you pay 10 dis plus 2 dollars that represent the 4% of your principle, the next mont you owe 40 you pay 10 dls plus 1.6 dls witch represent the 4% of what you owe etc etc... it seams you are paying less interest but no it remains the same hour principle just diminishes

[GiovanniMinto]

doesn't inflation affect an adjustable rate mortgage as well?

[YeepLife]

With a 5/1 ARM loan, can you refinance in a couple of months to a 30 yr conventional loan? Or, do i have to wait for 5 years? Do i have to earn a certain amount of equity before i can refinance to a lower rate conventional loan?

[MachoMelixD]

I am going to be taking my NMLS test on the next few days and can’t seem to get my head around a few practice questions I have on ARM. Is there any way I can email you the questions and you can go over with me how to solve them? It would truly help me figure this out before I take this exam. This is my second time taking it and I intend to pass it this time and this topic always gets me nervous because I am not confident on it. Thank you for anything you can do.