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LSDefine
Simple English definitions for legal terms
PLAM
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A quick definition of PLAM:
PLAM is short for price-level-adjusted mortgage, which is a type of mortgage where the interest rate is fixed, but the principal balance is adjusted to reflect inflation. This means that the amount you owe on your mortgage will increase with inflation, but your monthly payments will stay the same. It's important to understand the terms of your mortgage before signing any agreements.A more thorough explanation:
PLAM stands for price-level-adjusted mortgage, which is a type of mortgage with a fixed interest rate but the principal balance of which is adjusted to reflect inflation.
For example, let's say you take out a PLAM for $100,000 with a fixed interest rate of 5%. Over time, as inflation increases, the principal balance of your mortgage will also increase to reflect the higher cost of living. This means that you will end up paying more in total, but your monthly payments will remain the same.
PLAMs are designed to protect lenders from inflation, while also providing borrowers with a predictable monthly payment. However, they can be risky for borrowers if inflation rises faster than expected, as they may end up owing more than their property is worth.