What In The Heck Is A 2 28 ARM?

A 2 28 ARM is a 30 year  adjustable rate mortgage that has a fixed interest rate for the first 2 years and then is fully adjustable for the remaining 28 years.

This type of loan is very common for thesubprime mortgage lenders. I often refer to this loan as a band-aid loan. Simply because it gets you out of the renting rat race and into a home. It is more or less in my mind a temporary loan. Most people refinance out of the 2 28 ARM after the end of the 2 years into a better low mortgage rate loan.

One very important thing to keep in mind about the 2 28 ARM is that they almost always have a prepayment penalty. Make sure to ask your loan officer about this penalty. Ask how long the penalty is in affect, what the cost of the penalty is, and if there is any way to avoid it.

If you only qualify for a subprime mortgage. The 2 28 ARM may not be your only option. You may also qualify for a 3 27 ARMor a 30 year fixed home loan. If you absolutely positively do not want a 2 28 mortgage you can often times get the 30 year fixed interest rate loan. Be prepared for a much higher interest rate. The interest rate can often times be 2% to 3% higher.