Adjustable Rate Mortgages Snellville GA
Stone Mountain, GA
TM Financial Group, Inc/PBBIC Strategies
Education: BS, MBA
Years of Experience: 16
IARFC, NAPFA, NICEP
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What is an Adjustable Rate Mortgage Loan?
By definition, an Adjustable Rate Mortgage or ARM is a type of loan that features a changing interest rate. Whilst these loans might start with monthly payments that are lower than fixed rate mortgages, there are four important observations that you should take note of.
Firstly, the monthly payments can change – they can go up considerably even when interest rates haven’t gone up. The payments may not decrease by much, or at all, even when interest rates do go down. Third, even when you have made all your payments on time you could still end up owing more than you borrowed. Lastly, paying off your Adjustable Rate Mortgage early in an attempt to evade higher payments could see you pay a penalty.
1Considerations for an Adjustable Rate Mortgage Loan
So as to accurately compare two ARMs, or to compare an Adjustable Mortgage Rate against a fixed rate mortgage, there is need to have some knowledge about what the various terms involved are including indexes, discounts, negative amortization, margins, caps on payments and rates, payment options and the recalculation or recasting of your loan. It is important to know how high your monthly payments can rise. It is also of great importance to know how your monthly ARM payments will be affected in terms of whether you will be able to maintain higher payments in the futurt
2Four Guidelines Before Taking an ARM
An Adjustable Mortgage Rate loan is a trade-off whereby when you assume more risk over the long run you are given a lower initial rate. The following questions should help you make an informed decision:
The following are the basic features of an Adjustable Rate Mortgage Loan:
3The Initial Rate and Payment
The initial rate and amount of payment on an Adjustable Rate Mortgage loan only apply for a limited period of time which can be a month or even more than five years. The initial terms you receive can vary greatly compared to what the terms later on will be even when the interest rates remain as they were initially. It is prudent to ask lenders what the APR, i.e., annual percentage rate, is when they give you a quote of the ARM’s initial rate and amount of payment. If the APR is considerably higher than the initial rate, this should be your cue to know that the rates and payments will be much higher when your loan adjusts. This will apply even when the general interest rates have remained similar.
4The Adjustment Peri...