Web
Analytics
Living Flipside Online Resources and News
  Break Down. Rebuild. Live Well.
The Online Resource for Rebuilding and Living Well with a Shattered Background.
Get the latest news, resources, education, and housing information.


Adjustable Rate Mortgage Loans


An effective tool used by home buyers, ARM or Adjustable Rate Mortgages, offers a lower interest rate at the beginning of the loan and the risk of a hike in rates is shared by the borrower and lender. ARM, is ideal if you are certain about rising income expectations and short-term home ownership.

There are four basic aspects.

  1. One is that the initial interest rate is fixed 1-3 percentage points lower than fixed rate mortgages.
  2. Second there is what is known as adjustment interval, when after the initial period has elapsed the rate is modified in keeping with prevalent rates.
  3. Third, an index against which lenders can measure the difference between the interest earned on the loan and what would be earned in actuality in other investments.
  4. And, fourth, the component added by the lender to the index, usually 1.5-2.5 percent.

An ARM has in addition, safeguards like interest rate caps. This limits the amount of interest rate that can be applied to the payment during adjustment. Normally this cap would be about 2% point cap over the life of the loan.

ARM is ideal when it lends you buying power. You can opt to buy a property with a higher value and still pay a lower initial monthly payment. If you know for certain that you will reside in the house you are buying for a maximum of 5-7 years then ARM is the mortgage that will save you money. If you are prepared to take risks then ARM offers the greatest possible savings especially if the rate stays steady or declines over the years.

ARM is a calculated risk as there are no certainties. However if at the end of five years your plans change and you are about to continue in the same home for another 10 years then it is prudent for you to switch from ARM to a fixed rate mortgage.

Mortgagepig provides detailed information on Mortgage Loan Rates, Adjustable Rate Mortgage Loans, Second Mortgage Loan Rates, Best Mortgage Loan Rates and more.







Get FREE custom quotes, information, and advice.


COMMENT ON THIS ARTICLE



















Recent News and Articles
Principles to Change Your Life [Summarized] Principles to Change Your Life [Summarized]

Doing Things you Regret when you Drink [Tools You Need] Doing Things you Regret when you Drink [Tools You Need]

Four Steps to Refinance After Bankruptcy Four Steps to Refinance After Bankruptcy

Bend the knee… and experience GAME OF THRONES: The Touring Exhibition Bend the knee… and experience GAME OF THRONES: The Touring Exhibition

Disaster Food Relief from Hurricane Harvey to residents in Harris County starting Friday, Sept. 22. Disaster Food Relief from Hurricane Harvey to residents in Harris County starting Friday, Sept. 22.

FEMA Disaster Assistance: What You Need To Know. If you are a disaster survivor, you may qualify for federal assistance. FEMA Disaster Assistance: What You Need To Know. If you are a disaster survivor, you may qualify for federal assistance.

The Morris Brothers Case The Morris Brothers Case

Money advice from a Shark Tank judge is money advice everyone needs to listen to. Money advice from a Shark Tank judge is money advice everyone needs to listen to.



Web Statistics