Adjustable Rate Mortgage Loan in Southern California

The adjustable-rate mortgage, also known as an (ARM) is a home loan with an interest rate that can change periodically based on a specific index. ARMs usually have caps that limit the amount of change in the interest rate and or payments. The fixed period of an adjustable-rate mortgage can last for 6 months, 1, 3,5,7, or 10 years. This is a good choice for homeowners that plan to sale or refinance after a few years. Adjustable-rate mortgages adjust every six months to 1 year after the introductory period. For example, a 5/6 ARM will be the introductory fixed period of 5 years and the
6 represents how many months will pass between each rate change. The change in rate is calculated by combining the index and margin of the ARM.

Most Common Indexes

• COFI (Cost of Funds Index)
• LIBOR (London Interbank Offered Rate)
• TI (Treasury Index)
• Prime Rate
• Wall Street Journal Prime Rate
• CMT (Constant Maturity Treasury)

Example:
The index rate is 6.5% and the margin is 2%. Your fully indexed interest rate would be 8.5%. If during your adjustment period, the index rises to 7.5% then your fully indexed interest rate would be 9.5% during that adjustment period.

Interest Rate Caps

• The initial cap: This is the amount the interest rate can fluctuate in the first adjustment.
• The periodic cap: This is defined as the maximum amount each interest rate adjustment can have after the initial rate change.
• The lifetime cap: This determines the maximum amount the interest rate can change over the entirety of the loan period.

Benefits of Adjustable-Rate Mortgages

• Low introductory rates.
• Ideal for short term borrowing.
• Low payments.
• Interest rates and payment increases are capped.
• Interest only options

Adjustable-rate mortgages are a great lending solution for borrowers attempting to get a lower rate or plan to sell within a few years. Ask your Arbor Home Loan expert how much you could save with an adjustable-rate mortgage today.

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NMLS 1206543 & DRE 02128292

Arbor Financial Group. NMLS Entity ID #236669. DRE #01845041

Licensed In: CA, FL

NMLS 1206543 & DRE 02128292

Arbor Financial Group. NMLS Entity ID #236669. DRE #01845041

Licensed In: CA, FL