1, 3, 5, 7, 10 Year Adjustable Rate Loan Programs
An Adjustable Rate Mortgage (ARM) is a mortgage loan that
is most widely known for its low starting interest rate (when compared to the 30
& 15 year mortgage loans). This 'low' introductory rate is used to calculate
the mortgage payment for a specified period of time. Once this introductory
period is over, the interest rate is adjusted periodically based on a
preselected index. The most commonly used index is the yield on the one-year
Treasury Bill. The new interest rate is determined by adding this index to a set
margin (which is determined by the lender). Although there are a variety of
adjustable rate mortgage programs available, the most common program is the One
Year Adjustable Mortgage (one Year ARM). The interest rate on the one year ARM
is adjusted once each Year, for 30 years. APR's on variable rate loans are
subject to increase but may decrease from year-to-year, the borrower should be
prepared to handle an increase in his/her monthly payment (should the index rate
increase).
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