Posts Tagged ‘ARM’

All About Adjustable Rate Mortgages

Sunday, July 31st, 2011

ARM or adjustable rate mortgage is a type of mortgage loan where the interest rate on the note is periodically adjusted based on a variety of indices. One, three and five-year Treasury securities is a common index used by lenders in determining and measuring the particular index. A particular ARM is directed towards a specific index.

Adjustable rate mortgage is also known as “variable-rate mortgage” or a “floating-rate mortgage”. Interest rates increases over time once a fixed period is already due, it is linked to an economic index and which allows the borrower to pay a lower interest rate for about three years. In way of explanation, it is insured with interest rate that is usually lower than fixed-rate mortgages which can change at specific breach depending on the agreement of the lender and the borrower.

2/28 and 3/27 is the initial period of the loan and adjustment period respectively, it usually describes the adjustment period of ARM. A 2-8 mortgage means that the mortgage for Homes for sale in Arlington TX is fixed for a period two years and resets to a floating rate for the remaining 28 years of the mortgage.

Throughout the loan, initial interest of the ARM is lower than that of a fixed rate mortgage which can allow a borrower to qualify for a larger loan. When comparing lenders take a look at the index and the margin rate they are offering. While still doing your homework, ask the lender how each index has performed in the past so that you will know if the index has remained stable over the years.

Don’t be afraid to ask questions because it is your right to be informed of the every aspect of ARM as well as other types of home loans for Fairfield California Homes for Sale. Take note that lenders are required to give you written information so that you can compare and decide which mortgage is best for you.