Adjustable Rate Mortgages (ARMs):
Compared to fixed rate mortgages, Adjustable
Rate Mortgages, or ARMs as they are commonly
known, offer a lower interest rate to start,
so your monthly payments are generally lower.
But, the interest rate is adjusted at times,
based on an "index". Some of the
more common indices include United States
Treasury Bills, California's 11th District
Cost of Funds and the London Interbank Offered
Rate (LIBOR). Every lender then adds a set
margin to that index. The result - Your payments
could go up or down, depending on the economy
and its resulting indicators.
The index used, the margin added,
and how
often your rate is adjusted (usually
every
1, 3, 5 or 7 years) can be different
from
lender to lender. Be sure to
ask what they
are.
Look for ARMs with interest rate
"caps".
These limit how much your rate
can go up
or down each time it is adjusted,
and how
much it can go up or down over
the life of
the loan.
Consider an Adjustable Rate Mortgage if you:
- Want or need more home than you can qualify
for now at a fixed rate.
- Are confident your income will increase.
- Plan on moving within seven
years of buying
your home.
What else should you know about
ARMs?
If the starting rate is very
low compared
to others, you're probably getting
a "discounted"
rate. In that case, even if market
rates
stay the same, your payments
will go up when
it's time to adjust.
Many of our loan programs are
available with
adjustable rates including FHA
loans.
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| Fixed Rate Mortgages |
With a fixed rate mortgage, you know exactly
what your principal and
interest payment
will be every month. It
won't change because
your interest rate won't
change.
Learn More
|
| Adjustable Rate |
Adjustable Rate Mortgages (ARMs) offer a
lower interest rate to
start, so your monthly
payments are generally
lower. But, the interest
rate is adjusted at times,
based on an "index". Learn More
|
|
