Fully Amortized Adjustable-Rate Mortgage


A fully amortized adjustable-rate mortgage is a mortgage structured so that the principal and the interest will be fully paid within a specified time period. Full amortization refers to the necessary amount of time to fully pay the mortgage. This simply means that a 30 year mortgage will be paid in 30 years, for example, unless the borrower elects to pay in full before the mortgage expires. Interest rates of adjustable-rate mortgages will change over time, changing the amount of the monthly payment. This is necessary to keep the amortization schedule on track. While the interest rate and payment may fluctuate, the amount paid to the principal remains the same. The difference between a fully amortized adjustable-rate mortgage and a variable-rate mortgage is that in the variable-rate mortgage, the length of amortization may change while the monthly payment remains the same.