One of the many options available for financing the purchase of a home is the Adjustable Rate Mortgage (ARM). Typically an Adjustable Rate Mortgage will offer a lower initial interest rate than a typical Fixed Rate Mortgage. Despite the advantages of a lower initial payment, the rate of an ARM can adjust upward depending on economic conditions. Generally a 10% down payment is required, though some are much lower.
All Adjustable Rate Mortgages contain the following components:
• Initial Rate of Interest: Typically 2 to 3 percent lower than a fixed rate loan.
• Adjustment Period or Interval: The time between interest rate changes; Usually one, three or five years.
• Index: The economic indicator used to determine changes in the interest rate.
• Margin: The amount added to the index by the lender to set the actual rate of the ARM.
• Cap: A safeguard limiting the amount the interest rate can change to help avoid the risk of sharply higher payments.
An Adjustable Rate Mortgage with an option to convert to a Fixed Rate after a certain period of time is referred to as "Convertible". A Convertible Adjustable Rate provides the benefit of a lower initial rate and payment with the possibility of locking in a more predictable payment later.
We recommend Ken Gomes of Provident Bank
Phone: (909) 819-0930 or (800) 888-3085
Jane Blesch
