Adjustable ARM Loans

Adjustable-rate mortgages (ARMs) are home loans with an interest rate that may change periodically depending on changes in a specified financial index. Adjustable-rate mortgages typically have an initial fixed-rate period, during which the interest rate remains constant for a set period, often 5, 7, or 10 years. After this initial period, the interest rate can fluctuate periodically based on the terms of the loan.

Borrowers considering an adjustable ARM loan should carefully consider their financial situation, future plans, and the potential risks associated with fluctuating interest rates. It is important to understand the terms and conditions of the loan, including how the interest rate can change, the frequency of rate adjustments, and any caps or limits on how much the rate can increase or decrease during each adjustment period. Understanding these aspects can help borrowers make informed decisions about whether an adjustable ARM loan is suitable for their specific financial circumstances and long-term homeownership goals.

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Frequently Asked Questions

Mortgages are typically offered by financial institutions, such as banks and credit unions. Mortgages can also be obtained from other sources, including private lenders and government agencies.Mortgage rates vary depending on the borrower’s credit history, income level, loan-to-value ratio, type of property being purchased and other factors.

When should I refinance?

There are a lot of reasons to get a new loan. We only look at the cost of getting a lower interest rate. We don't look at how much you'll save on your payments, which can change the results because you're frequently borrowing less money. Then, we figure out how long it might take to get those costs back. In many cases, you, the borrower, won't have to pay any or very little of the costs. Even a slight change in rate can save you money. We also look at the remaining time on your mortgage. How much money you could save, and what you plan to do with the money you save from lower rates.

What are the points?

The no points, or based on paying 1 point, are references to a percentage of the total amount that can be borrowed. Since one point is equal to one percent of the loan, 1 point on a $100,000 loan would amount to $1,000. 1 point on a loan of 1.5% would be equal to $1,500.

Should I pay points to lower my interest rate?

Paying discount points to cut loan rates can be effective. Even if you anticipate staying in the property for a long time, the points may not be worth paying unless they provide a cost-effective return depending on the duration it takes to recover the costs. Points can often cut payments or increase borrower power.