Adjustment frequency is a term that is often used in connection with mortgages. The term applies to the changes that may occur in the interest rates on mortgages over the length of the mortgage. Adjustment frequency is an important factor that must be considered when applying for a mortgage, even though there are often provisos in the mortgage contract establishing the right of the lender to change the interest rate without any notice to the borrower. Arbitrary adjustment frequency may impact the homeowner in various ways that include defaulting on the repayment of the mortgage. This will affect the homeowner who may lose the home and valuable credit points as well as the lender who may be affected by the inability of the homeowner to keep the terms of the mortgage.
The adjustment rate usually applies to adjustable-rate mortgages, a category of mortgage that often lacks a limit to which the interest rate can either fall or rise. While this might sound like something homebuyers would want to avoid, it usually has enticing qualities to make it seem like a good deal to such borrowers. Very often, this type of mortgage usually starts at a really low interest rate in comparison to the more stable mortgage with a fixed rate. The requirements of qualifying for this type of mortgage are also not as rigid as those employed by lenders when considering candidates for fixed-rate mortgages. An issue with this type of mortgage, however, is the unpredictability with which the interest rates may change as a part of the adjustment frequency.
Where the adjustment frequency has not been fixed, the borrowers may find themselves paying increasingly higher rates for months. The adjustment frequency might also occur as often as monthly, or it may be spaced apart even more, to a biannual occurrence. Whatever the case, arbitrary adjustment frequency often has negative effects on those who are saddled with an adjustable-rate mortgage. Quite often, these people might find out much later that they cannot sustain the increases to the interest on the mortgage and may find themselves lagging behind in payments. Considering the fact that the cycle of the rise and fall of the interest rate might remain on a high far longer than the length of time it remains on a low, the possibility for foreclosures are also very real for those who lack the ability to sustain the momentum of the adjustment frequency.
