Adjustable Rate Mortgage

• The 2/28 mortgage is a kind of adjustable rate mortgage that also has a fixed period of interest. With this type of loan, the first two years have a fixed interest rate, and then the rate is adjusted to match market conditions. After two years have passed, the loan will be recalculated with market interest rates. This has the potential to raise or lower your payment, depending on the condition of the interest rates in the market.
  
  

Spread

• With this type of market, a spread will apply to the change in your interest rate. When the interest rate is recalculated, the lender will start out with the prime rate, which is a market interest rate that fluctuates every day. On top of that number, the lender will add a spread. The spread is based on your credit history. If you have a very poor credit history, the spread will be larger. This means that the interest rate on your loan will be higher than market rates.
  
  

Subprime Lenders

• The 2/28 mortgage is a type of loan that has commonly been used in the subprime lending industry. Subprime lenders are mortgage lenders for individuals with poor credit scores. If you cannot get a loan with a traditional lender, you may be able to work with a subprime lender instead. Subprime lenders work with individuals who have bad credit because they charge interest rates that are much higher than what a lender could get from a traditional lender.
  
  

Availability

• Even though there are some 2/28 loans still available in the market, they are not as commonplace as they once were. As a result of the subprime mortgage crisis, these lenders have become much more strict in their lending standards in recent years. Some lenders completely eliminated this type of loan and offer a more traditional type of mortgage loan. If you want this kind of mortgage, you may have to shop around with multiple lenders first.