'Learn what a 2/28 adjustable-rate mortgage is, how its reset structure
A 2/28 adjustable-rate mortgage is a mortgage that starts with a fixed rate for two years and then shifts into an adjustable-rate period for the remaining term, often the next twenty-eight years on a thirty-year loan. It is a classic short-teaser, long-reset structure.
During the first two years, the borrower gets predictable payments and often a relatively low introductory rate. After that, the interest rate resets according to an index plus margin, subject to any caps in the loan documents. The economic risk is that the borrower may face a sharp payment increase if rates are higher or if the introductory rate was far below the eventual fully indexed rate.
This matters because 2/28 ARMs became associated with payment shock, refinancing dependence, and mortgage-credit stress. They illustrate how loan structure, not just starting rate, shapes household credit risk.