Interest caps come in two versions: periodic caps, which limit the interest-rate increase from one adjustment period to the next when current bank mortgage rates move higher and overall caps, which limit the interest-rate increase over the life of the loan.Index The index is the measure of interest-rate changes that the lender uses to decide how much the interest rate on an ARM will change over time.

Cap, payment A limit on how much the monthly payment may change, either each time the payment changes or during the life of the mortgage.If your loan includes a prepayment penalty, be aware of the penalty you would have to pay. You can figure out the cost of any loan by using a mortgage calculator with taxes mortgagecalculatorwithtaxes which can calculate how much it will cost you every month in mortgage payments.

No one can be sure when an index rate will go up or down just when mortgage lending rates today move higher tomorrow.Prepayment penalty Extra fees that may be due if you pay off the loan early by refinancing your home. Ask the lender if you can get a loan without a prepayment penalty, and what that loan would cost.The actual expenses at closing may be somewhat different from the good faith estimate.

The rate changes during the life of the loan in line with movements in an index rate, such as the rate for Treasury securities or the Cost of Funds Index.Amortizing loan Monthly payments are large enough to pay the interest and reduce the principal on your mortgage.This means that even after making many payments, you could owe more than you did at the beginning of the loan.

Adjustable-rate mortgage (ARM) A mortgage that does not have a fixed interest rate.Some index rates tend to be higher than others, and some change more often.Equity The difference between the fair market value of the home and the outstanding mortgage balance.Cap, interest rate A limit on the amount your interest rate can increase.

Good faith estimate The Real Estate Settlement Procedures Act (RESPA) requires your mortgage lender to give you a good faith estimate of all your closing costs within 3 business days of submitting your application for a loan, whether you are purchasing or refinancing a home.Negative amortization Occurs when the monthly payments do not cover all the interest owed.Interest The price paid for borrowing money, usually given in percentages and as an annual rate.

You should ask your lender how the index for any ARM you are considering has changed in recent years, and where the index is reported.By law, virtually all ARMs must have an overall cap.The interest that is not paid in the monthly payment is added to the loan balance.Payment caps do not limit the amount of interest the lender is earning, so they may lead to negative amortization.

All three major search engnies, Google,Yahoo and Bing all have comparison shoppoing for mortgage rates. In addition to the search engines there are many other resources online. There are resources available to track mortgage rates, you can use a mortgage rate widget that allows you to stay ontop of current mortgage rates and act when rates hit a certain point.

Probably the website that has the most extensive list of today’s mortgage rates is monitorbankrates.com.