Adjustable Rate Loan

Short-Term with the Lowest Rates

Rebecca Foote Mortgage Team provides a variable or adjustable rate mortgage (ARM) which is a mortgage that has a fixed interest rate for a short period of time, often 3, 5, or 7 years.  The interest rate may fluctuate throughout the remaining term of the loan based on certain conditions, such as the predetermined index, margin, and periodic caps.

Index

This benchmark is determined as a loan application in which an adjustable rate mortgage will fluctuate. Common indexes include, 1-Year Constant Maturity Treasury (CMT), 12-Month Treasury Average (MTA), 6-Month London Inter Bank Offering Rate (LIBOR) and 11th District Cost of Funds Index (COFI).

Margin

A fixed percentage added to the index to compute the newly adjusted interest rate. The resulting rate is typically rounded to the nearest one-eighth of a percent.

Periodic Adjustment Caps

Most adjustable rate mortgages have initial, periodic, and lifetime interest rate caps. These caps determine the maximum interest rate adjustments which fluctuate during the initial interest rate adjustment, as well as each periodic interest rate adjustment thereafter, and the maximum lifetime interest rate adjustment over the life of the loan.

Features of This Loan

• Lower initial rate and monthly payments than a fixed rate loan
• Variety of fixed-period options, up to 10 years
• Various rate cap options

Consideration Points for Borrowers

• Have varying or seasonal income
• Planning to relocate or pay off loan within or shortly after fixed rate period
• Willing to accept the potential of future interest rate changes

If you have any questions about Adjustible Rate Loans, don’t hesitate to reach our to my team at (717) 609-4044. We are happy to answer your questions and would love to work with you!