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Basic Variable Loan Program
 A Basic Variable Loan Program is quite similar to a standard variable loan except that a few additional features and the associated flexibility and benefits of these features are missing in a basic variable loan. More...
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Definition of Adjustable Rate Mortgage
| Adjustable rate mortgage (ARM) is a home loan which the interest rate is periodically adjusted depending on a variety indexes. Two of the most common indexes are the Cost of Funds Index (COFI) and one year constant-maturity Treasury (CMT). The index can affect how your payment change. |
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Here are some of the important and basic features of ARMs :
- Adjustment Period: Adjustment period refers to the period of time which the interest rate will remain unchanged. At the end of adjustment period, monthly loan payment is recalculated.
- Initial Interest Rate: This period refers to the beginning of an ARM.
- Prepayment: Some lenders punish home buyer with special fees, if the ARM is paid ahead of time. Generally, prepayment terms can be negotiable.
- Negative Amortization: This term refers to increasing mortgage balance. It happens when the interest rate on the mortgage exceeds the mortgage payment.
- The Margin: The margin refers to percentage points that lenders add to the index rate to figure out the ARM’s interest.
- Initial Discounts: Some lenders offer special discounts during the first few year of a loan as promotion aids.
- Payment Caps: A payment cap refers to how much payment can increase at each adjustment.
By law, lenders are required to provide you the loan information. If there is anything that you don’t understand about your ARMs loan, don’t hesitate to ask as many questions to help you under all aspect of your home loans.
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