• ¡Welcome to Lending Network!
  • America's Fastest Growing Loan Scenario Online Forum
Hello There, Guest! Login RegisterLogin with Google+


Welcome to Lending Network! America's Number One Loan Scenario Help Center For The Public Join Our Lending Network Online Community Forum And Ask Your Loan Case Scenarios To Our Moderators & Real Estate Professionals.
It takes seconds to become a member. Lending Network was created and launched as a mortgage, real estate, and credit information center for the general public to utilize it as a loan scenario help desk online community forum.

Thread Rating:
  • 1 Vote(s) - 5 Average
  • 1
  • 2
  • 3
  • 4
  • 5
ARM
#1
What is the Interest rate for an ARM will change periodically based on?
 
Reply
#2
ARM stands for Adjustable Rate Mortgages which are 30 year mortgage loans but is only fixed for a certain amount of years. For example, if you have a 5/1 ARM based on the CMT and a margin of 3% with a starter rate of 5.0%, your initial mortgage rate of 5.0% will be fixed for the first five years and will adjust every year thereafter for the remaining 30 years. Every year, your mortgage lender will base the new mortgage rate based on the index plus the margin. The CMT, Cost Maturity Index, is the one year treasuries which is next to nothing right now. Your index plus the margin will be the new adjusted mortgage rate. Many mortgage lenders institute a clause to adjustable rate mortgages that the new adjustment rate cannot be lower than the starter rate. So on year number 6 if the current CMT is at 0.15% and the margin is at 3%, the new rate will be 3.15%. However, since the adjusted rate cannot be lower than the starter rate of 5.0%, your new mortgage rate will remain at 5.0% since the 3.15% is lower than the 5.0% starter rate.

Here is an article on Adjustable Mortgage Rates, ARMs:

http://gustancho.com/adjustable-rate-mortgages-work/

 
Reply
  


Forum Jump:


Browsing: 1 Guest(s)