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March 13, 2018

Potential Disadvantages of an Adjustable Rate Mortgage

Filed under: Mortgage — Tags: , , , , , , , — admin @ 12:46 am

There are both advantages and disadvantages to adjustable rate mortgages. Your lender may be pushing an adjustable rate mortgage for any number of reasons, including that they are more profitable for the lending company. If you only look at the advantages of an adjustable rate mortgage, they can sound pretty good. You start with a lower interest rate, which means lower monthly payments. Because of the lower payments and rate, you may be able to afford a larger mortgage. Your lender may be pitching it as a way to buy a bigger house than you could otherwise afford, or suggest that it’s a good way to get into the housing market. Most commonly, the lender may suggest that you should take the adjustable rate mortgage for now, and refinance later when the rates adjust up. While all of these things are true, there are also cons to an adjustable rate mortgage. It’s important that you consider both sides of the issue before making a decision on the type of mortgage that you want to take out.What an adjustable rate mortgage is Unlike a fixed mortgage, which comes with a specific interest rate that remains the same for the life of the loan, an adjustable rate mortgage (ARM) has an interest rate that fluctuates according to a specified index. Your adjustable rate may be tied to the interest rate on Treasury Bonds, to the Consumer Price Index or to a number of other indicators. If that index rises, your interest rate – and your monthly payment – will rise. If it drops, so will your interest rate and monthly payment. Why adjustable rate mortgages can be attractive When lenders approve a fixed rate mortgage, they are placing a finite limit on the amount of money they’ll make from that mortgage. An adjustable rate mortgage offers the lender the possibility of making more money if interest rates rise over the life of the loan – which is a good possibility. To offset the limit on fixed rate mortgages and make adjustable rate mortgages more attractive to home buyers, lenders typically offer lower interest rates on adjustable rate mortgages than they do on fixed rate mortgages. In essence, they are offering borrowers a more attractive rate in return for assuming the risk that their mortgage rate and monthly payment will rise over the term of the loan.The down side of adjustable rate mortgages When looked at in that light, some of the cons of an adjustable rate mortgage become obvious.1. Interest rates can go up, raising monthly payments as well. Most borrowers understand and accept that their monthly mortgage payment may rise, but are willing to take the chance that their mortgage will continue to remain affordable. It’s important to know the caps on interest rate rises by which your lender is bound. When you shop around for the best adjustable mortgage, it’s important to look further than the initial interest rate so that you understand exactly what expenses you may be agreeing to.2. Over time, payments nearly always surpass the payments on a fixed rate loan for the same amount. If you’re planning to stay in your home for the long haul, this can be an important consideration. Depending on the specific loan agreement that you make, it may be several years before the interest rate and monthly payment reach and surpass the monthly payment for a fixed mortgage. If you’re only planning to stay in your new home for a few years, this can work to your advantage, because you’ll be paying lower monthly payments for most of that time. If, on the other hand, this is your dream home where you plan to live the rest of your life, a fixed rate mortgage is probably more economical.3. Fluctuating payments can make it difficult for you to make a budget. While many ARMs only adjust once a year, some may adjust as often as once a month. More frequent adjustments can make it very difficult to fit your monthly mortgage payment into your budget because you will only know what your next month’s payment will be when you receive your notice. Even in the longer term, a fluctuating mortgage payment can make it difficult for you to plan long-term savings and investments.4. If fixed rate mortgages become favorable enough that you decide to switch, you’ll have to refinance and incur the costs and fees related to refinancing your mortgage.5. The annual interest cap may not apply to the first interest adjustment, and it may be a big one. Many lenders offer very low initial interest rates on ARMs to attract first time home buyers. Often, these mortgages exempt the first increase from the annual cap on adjustments. This can be especially difficult if the ARM was one of the hybrids that offered a low fixed rate for one to five years, with a jump to market interest rates at the end of the specified period. When that happens, your monthly mortgage payment can suddenly rise by hundreds or even more than a thousand dollars.

Brain Jenkins is a freelance writer who writes about topics and financial products pertaining to the mortgage industry such an adjustable rate mortgage available from a mortgage company.

August 7, 2017

Taking the Guesswork Out of Adjustable Rate Mortgages

Filed under: Mortgage — Tags: , , , , , — admin @ 12:49 am

Next to critiquing the decorating taste of your home’s previous owner, playing the “adjustable mortgage game” may rank as one of the most popular (and least pleasant) pastimes of Canadian homebuyers.

Here’s how it works.

As you’re exploring your mortgage options, you review the long and steady slide of mortgage rates in Canada over the last decade and make the decision to go with an adjustable mortgage when you buy, at renewal or when refinancing. You’re now a player. Then you watch for clues about mortgage rate movement, trying to guess the perfect moment to lock in your mortgage. The objective of the game is to try to guess the bottom… and you won’t know it’s the bottom until it’s too late. In today’s low rate environment, we should acknowledge that most of the players are already winners; but it can still be a stress-inducing game.

One way to remove all of the guesswork is to consider a capped-rate adjustable mortgage, although there are only a few options available in the marketplace.

There is a unique adjustable mortgage that is not based on the Canadian Prime Rate (the usual benchmark) – but on what is known as the Banker’s Acceptance rate: a benchmark that is used for professional money managers. In effect, the BA rate, as its known, is the rate lenders charge one another.

Not surprisingly, it’s typically much lower than prime. In fact, the effective rate of this adjustable mortgage has been consistently lower than competitive variable or adjustable rate products based on Prime. A capped version is now available.

An adjustable rate mortgage with a cap offers unlimited downside rate movement, but also provides a guarantee that the rate will never rise more than a certain percentage higher than the starting base rate – no matter what happens to the lending rates.

The rate cap takes the guesswork out of the adjustable mortgage game. If rates continue to drop, your Mortgage rate also drops accordingly. But if rates begin to rise, you know that your own mortgage rate has a fixed ceiling. Imagine, no more worrying about when to lock in your mortgage, and no more second-guessing your decisions when rates go back down again. Of course, this kind of flexibility comes at a small premium over a regular adjustable-rate mortgage.

In the past several years, more and more Canadians have passed on the security of traditional fixed-rate mortgages for the savings potential of an adjustable rate. And in an environment of dropping rates, the adjustable rate choice has proven its value to homebuyers. With today’s rates among the lowest in memory, many homeowners continue to worry about whether or not they should lock in or not. After all, we don’t want to lose the flexibility of having our rate adjustable downward… but we’d also like to have it fixed upward.

If we had a crystal ball, we could make perfect decisions about our mortgage options, and we’d know how to secure the best rate. But a mortgage that passes on declining rates and has a rate cap on the upside can be the next best thing to seeing into the future. And the result is an adjustable mortgage game that the homebuyer is heavily favoured to win.

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July 24, 2017

All About Denver Adjustable Rate Mortgages

Filed under: Mortgage — Tags: , , , , , , — admin @ 12:47 pm

There has been a lot of talk about adjustable rate mortgages these days. Are they to blame for the housing crunch and the problems that people are facing? Not necessarily. There are still adjustable rate mortgages out there that can be the best options for hopeful Denver home owners. These can be goodDenver mortgage products.

How Does An Adjustable Rate Colorado Mortgage Work?

If you want to understand a Colorado mortgage with an adjustable rate, it is a mortgage which has an interest rate will change at a certain point, depending on other key interest rates rules connected to home lending. During the loan, the adjustable rate Denver mortgages will move up and down and effect the interest paid on the loan.

There will be a period in which the interest rate on a Colorado mortgage product is fixed. After that, the adjustable rate loan (also known as an Adjustable Rate Mortgage, or ARM) will change depending on the current rate (and the terms of the Colorado mortgage deal as well as current market conditions). The fixed rate the loan starts with is usually much lower than a person would have gotten if they had qualified for a fixed-rate loan. So, for a certain amount of time, the rate will be fixed and the payments will be consistent, predictable and very low, but after that period, in sometimes two to five years, the interest rate and mortgage payment will change at set periods of the loan.

Are There Any Adjustable Rate Denver Mortgage Worries?

Of course, there is a risk that goes along with an adjustable rate Denver mortgage, but this is what allows lenders to give borrowers a lower rate at the beginning of the term. This is what makes them different than fixed-rate Colorado mortgages, which may have a higher initial rate.

The risk with the loan comes because what the interest rate will eventually become is unknown at the outset of the loan. So then the mortgage payment becomes equally unpredictable. If you have an adjustable rate Colorado mortgage that goes into its adjustment period, you will see your mortgage payment fluctuate. But there is a ceiling to how much the rate can change and how often the rate can be adjusted.

In order to avoid the risks of an adjustable rate Denver mortgage, the best thing to do is refinance your loan before the end of the fixed-rate period of your loan. Now there is a risk since there is no way to predict when and if and how your loans will adjust. When you refinance your Colorado mortgage, there is a chance your fixed rate will move up.

Positive Aspects of Adjustable Rate Colorado MortgagesThere are some periods in life in which the adjustable rate Denver mortgage could be beneficial to you and your finances. It all depends on your particular situation at the time. Here are some scenarios in which an ARM might work:

• If you plan on selling your home soon

• If you won’t stay in your house for the length of the loan

• If you need to a influx of additional cash-flow

• If you have a low credit score, which won’t allow you to get the best fixed rate. However, you can use the fixed-rate period of the ARM to improve your credit and refinance for a good fixed rate.

• If you have another way out of a mortgage before the rate goes up.

• When you still have good terms and a ceiling on the interest rate.

There are good lenders out there who will be able to work with you in handling your ARM. There are Denver mortgage lenders who have built up a good reputation working with customers to deliver them good mortgage products that won’t be a financial burden.

If you want to discover the advantages of ARM products by working with a Colorado mortgage lender , you need to find someone who has an established business, rather than someone who has not been around a long time and may have more questionable Denver mortgages for sale.

This article is written by J.B. of 1st American Mortgage and Loan, LLC, a Colorado mortgage lender who offers access to information on obtaining a Colorado mortgage loan as well as other information on loans inColorado online mortgage quotes, and rates through his website

This article is written by J.B. of 1st American Mortgage and Loan, LLC, a Colorado mortgage lender who offers access to information on obtaining a Colorado mortgage loan as well as other information on loans inColorado online mortgage quotes, and rates through his website

April 6, 2015

Adjustable Rate Mortgage Loan- the Good, the Bad, the Shocking!!!

Filed under: Loan — Tags: , , , , , , , , — admin @ 12:47 pm

Leading Expert Advice…

What does an Adjustable Rate Mortgage Loan really mean to the customer?

Adjustable Rate Mortgage Loan are long term mortgage loans much like a 30 year fixed, but with variable interest rates. This simply means that they have a schedule of principal and interest payments just like a fixed mortgage, but the interest rate may be adjusted regularly during the term of the loan. This causes the monthly payments to move up and down as the rate is adjusted.

Adjustable Rate Mortgage Loan (ARM) can be a highly effective financing alternative for first and second mortgages, because of the effectiveness of many ARM’s, most home equity loans are structured as adjustable rate mortgages (ARM‘s). Depending on the contract interest rate, discount points, loan to value ratio, and maturity, ARMs can have their own unique set of terms:

– Adjustment Interval: Most ARM’s are adjusted at regular intervals outlined in the mortgage contract. In between these intervals, the interest rate on the loan is consistent. The less time between the interval, the more sensitive the loan is to changing interest rates. Most first ARMs are adjusted every year.

– Initial Interest Rate: All ARMs have an interest rate that is fixed, just like a 30 year fixed mortgage, until the first adjustment date. Sometimes this rate is set low to attract borrowers, called a teaser rate. Therefore, the initial interest rate does not indicate the long term cost of the loan. This should be a concern for borrowers who are looking to keep their loan for a period of 5 years or more.

– Convertibility: Some ARM’s provide the borrower with the option to convert to a fixed rate loan during the loan term. Because your payments almost always rise later on, some detractors call it a contract with the devil. Nonetheless, an ARM in some markets can cut your initial payments by as much as a third. That can mean the difference between being able to purchase and being left out in the cold.

The best way to understand an ARM is to compare it to a fixed rate mortgage. With a fixed-rate mortgage you always know where you stand. Your interest rate and your monthly payment remain the same for the life of the loan whether it is for 5 years or 30 years.

With an ARM, it’s a bit different. Your interest rate fluctuates, it can move up or down depending on market conditions. Your monthly payment, which reflects the interest rate, like wise can vary up or down over the life of the loan.

There are some borrowers who find the ARM to be the perfect loan for their particular situation, while others have lost their homes due to a misuse of their ARM loan, or simply because they were not informed by their Loan Officer, how to properly use their particular ARM loan.

Many have referred to ARM’s as bridge loans, because some were designed to help borrowers get back on their feet financially. From that position, the borrower was to refinance out of the ARM into a fixed rate mortgage.

September 14, 2013

Equity Rates – Fha Home Mortgage Loans – Refinance Adjustable Rates And Debt

Homeowners throughout the country to continue turning in order to refinance and get cash for home equity loans for paying off high credit cards, which are escalating out of control. The Federal Reserve lowered key interest rates yesterday, but many homeowners can not simply the combination of rising mortgage interest rates set at the same time as the rising interest rates on their credit card company. Unfortunately, recent changes have resulted in the bankruptcy law credit card minimumPayments made by the lenders who issued the credit doubled. As consumer debt grows to the concerns of homeowners throughout the nation, which can be a foreclosure, where do their homes. It is reasonable, capital is still available for refinancing a disposal of the debt that you cause pain to use.

Insolvency be used, as people under stress from increased credit card debt. But under the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) 2005 filing for bankruptcy is expensive, complicated and time consuming. This is why fixed-rate home equity loans have become popular ways to refinance high-interest credit card debt, especially for people with low credit scores.

Critics suspect that credit card accounts are not safe at home. But then the interest is not tax deductible. Most of the first or second mortgage loans mortgage rates argue that the tax is deductible. Home> Equity loan at an interest rate conditions and revolving credit cards will be charged, charged interest on interest.

While credit card proponents point out that the loan conditions for longer-term refinancing and home equity loans are usually a credit card authorization as they are, not with the impending penalty rates and additional costs, the compounding interest. Many consumers begin to understand that fixed interest rates are more realistic for actually paying off yourDebt.

Borrowers such as the refinancing of home loans, because they have a reduced interest rate, which can receive offers an affordable payment. Variable-rate mortgages have caused a real in 2008 as a foreclosure and late payment rates stir record highs in states like California, Florida, Indiana, Michigan, Virginia and Massachusetts have achieved. With new initiatives FHA allows homeowners can refinance their ARM with an FHA home mortgage now that cash-back and debt consolidation.FHA to refinance home to vote and run-time guidelines prohibited any cash back or consolidating limited account.  read more

March 24, 2013

Home Loan Loan Refinance: Fixed Or Adjustable?

Filed under: Loan — Tags: , , , , , , — admin @ 12:47 pm

There are so many possible reasons for a home loan loan refinance. In this article, we are going to look at the option of a fixed or adjustable rate. Hopefully, this will help you to consider your alternatives and your next course of action for a home loan loan refinance.Lower The Bills!
An obvious reason for a home loan loan refinance is to lower your monthly payments. However, please analyze whether the cost of the refinance is worth the savings. If you intend to sell the home within a short period of time, refinancing with no immediate costs is the option for you. This type of refinancing allows you to forego payment for lender fees. You pay those fees instead through a higher interest rate over the amortization period.
On the other hand, you might want to consider an Adjustable Rate Mortgage if you plan to keep the home for quite a while. You could opt for something that starts with a fixed rate and morphs into an Adjustable Rate Mortgage in around five years. When you leave the home, you will also be out of the loan. You will also have considerable savings on your principal, as well as interest and payments.Feel Secure
Another reason for a home loan refinance is to feel secure in a fixed rate loan. This is because adjustable rates might be disconcerting for some. If you can project how long you will be in the home, you can get an Adjustable Rate Mortgage that starts with a fixed rate. After the initial fixed rate term, the rate adjusts annually. Hopefully, you would have moved by the time it got to that point.
Planning to be in the home for a long time? You should look at getting a fixed rate loan with a term of up to thirty years. But remember that these types of loans may have a higher rate than an Adjustable Rate Mortgage. Check to see how long you might be staying in the home and just how important the security of a fixed rate loan is for your home loan loan refinance.An ARM And A Leg?
You might be wondering why you would ever opt to go from a from a fixed rate loan to an Adjustable Rate Mortgage. This is a viable option if you wish to save on your loan payments for a short period of time before moving to another home. These substantial short-term savings are made possible by taking advantage of the switch from a fixed rate to an adjustable one. You want immediate savings so, again, look for an Adjustable Rate Mortgage with no “out-of-pocket” fees. It might mean higher interest rates but at least you save on costs now!So Which One?
As with most things, you are the best person to determine which type of refinance is best for your need. Short term? Long term? A mix? It helps greatly if you have a solid plan so you can pick the best option.

November 12, 2012

A Bamboozling Dilemma: Fixed Rate or Adjustable Rate Mortgage?

Filed under: Mortgage — Tags: , , , , , , , , — admin @ 12:47 am

A lot of people who plan to buy a house often wonder what kind of mortgage is right for them: an adjustable rate mortgage or a fixed rate mortgage. To be able to determine the suitability of a mortgage type, potential buyers should familiarize themselves with the advantages and disadvantages. This way, they enable themselves to come up with informed decisions.

Depending on the term of the mortgage and a borrower’s financial needs, both the adjustable rate mortgage and the fixed rate mortgage are appealing to various types of homebuyers. But it is essential that homebuyers become aware of the difference between the two kinds of mortgages.

An adjustable rate mortgage, or an ARM for short, is commonly known as a variable rate mortgage. This mortgage features an interest rate linked to an economic index. Interest rates and mortgage payments are occasionally adjusted in keeping with the changes in the said index. The primary interest rate for an adjustable rate mortgage is lower compared to the rate of a fixed rate mortgage, which features an interest rate that remains unchanged for the entire life of the loan. In contrast to the fixed rate mortgage, the adjustable rate mortgage offer borrowers the choice to make an early repayment of the initial principal borrowed without a penalty charge.

A principal reason why you should consider an adjustable rate mortgage is that you may end up with a lower monthly mortgage payment. Because you’re taking a risk with unpredictable interest rates, you are rewarded with an initial rate that’s lower compared to an adjustable rate mortgage. You can consider an adjustable rate mortgage a good option if: you plan to stay in your home for only a few years; you anticipate an increase in your future income; or, the existing interest rate for a fixed rate mortgage is too high.

One disadvantage of the adjustable rate mortgage is that there is a risk that the rates will rise on you, which means that your monthly mortgage payment will increase significantly. It is possible that the payment can get too high that you may have to default on your loan.

On the other hand, a fixed rate mortgage features an interest rate that is fixed for the entire life of the loan, even if the mortgage lender’s interest rate rises and falls in the future. Because the payments are predetermined, homeowners can budget the amount they need to set aside for their monthly mortgage payment. They can also afford to plan their finances for the long-term.

The drawback is that this type of mortgage comes with higher interest rates. Also, with a fixed rate mortgage, lenders often set up a prepayment penalty that dissuades borrowers from paying off their mortgage early or refinancing their mortgage loan with a lower interest rate. This type of mortgage also puts borrowers at a disadvantage when interest rates fall. However, borrowers can shift to a mortgage program that enables them to benefit from lower interest rates. One way to do this is to qualify and pay for mortgage refinancing.

Compared to an adjustable rate mortgage, the fixed rate mortgage is a more attractive choice for borrowers who opt for a long-term plan. The fixed rate mortgage also offers more security for buyers and is best suited for homeowners who wish to keep their houses for a longer period of time.

Get more of Matt Peters’ FREE tips and information on Fixed and Adjustable Mortgage Rate at

August 11, 2012

The Pros and Cons of Adjustable Rate Mortgage

Filed under: Mortgage — Tags: , , , , — admin @ 12:47 am

An adjustable rate mortgage, commonly referred to as an ARM, is a mortgage where the interest rate on the mortgage changes periodically, on a schedule, according to an index. The most common indexes used to determine the interest rates are:

Grant Eckert is a freelance writer who writes about topics pertaining to the mortgage industry such as Mortgage Company | Mortgage Lender

January 31, 2012

Advantages of an Adjustable Rate Mortgage

Filed under: Mortgage — Tags: , , , , — admin @ 12:47 am

Adjustable rate mortgages have taken a bad rap in the latest mortgage crisis. Financial pundits from all ends of the spectrum blame the irresponsible use of adjustable rate mortgages and hybrid adjustable rate mortgages for the increasing number of home owners who are delinquent or in foreclosure on their mortgages. That’s unfortunate, since adjustable rate mortgages can offer real benefits to home buyers in many situations. Here’s the scoop on the pros of an adjustable rate mortgage.What an adjustable rate mortgage is There are many kinds of mortgages, but all of them fit into one of three different types – fixed rate mortgages, adjustable rate mortgages and hybrid mortgages which use features of both adjustable and fixed rate mortgages. A fixed rate mortgage is one in which the interest rate for the mortgage remains the same for the entire life of the loan, no matter what market interest rates do. An adjustable rate mortgage is one with an interest rate that can fluctuate up or down. It is usually tied to a specified market index, and has specific rules for when and how much the rate can be adjusted. The most common hybrid mortgage type features an initial low fixed rate that remains the same for two, three or five years, then adjusts to the market and becomes and adjustable rate mortgage. Pros of an adjustable rate mortgage There are a number of advantages to choosing an adjustable rate mortgage. Some of them are advantageous for only one type or buyer or another, others are an advantage for everyone.1. An adjustable rate mortgage may help you afford a bigger mortgage than a fixed rate mortgage. Because adjustable rate mortgages often have lower initial interest rates than fixed rate mortgages, they can allow you to qualify for a larger mortgage than a fixed rate mortgage. That means that you can buy a more expensive home because your monthly payments start out smaller. If you’re a young home buyer just starting in a career, this can be a major advantage because it allows you to pay smaller monthly payments in the first years when your salary is smaller.2. The initial payments are lower than they would be with a fixed rate loan because the interest rate is lower. With a fixed rate loan, lenders accept that if interest rates rise, they will make less money on the mortgage than they would with an adjustable rate mortgage. They offset that ‘loss’ by charging higher interest rates on fixed rate mortgages than they do on adjustable rate mortgages. That means that you start out with a lower monthly payment. As long as interest rates don’t rise, you’ll continue to pay lower monthly payments.3. If the interest rates go down, your interest rate and monthly payments will adjust down automatically. If you have a fixed rate mortgage and the market interest rates drop significantly, you can only take advantage of that by refinancing your mortgage. Refinancing incurs early repayment fees and other costs that you avoid by having a mortgage that adjusts automatically to the prevailing interest rates.4. An adjustable rate mortgage can save you a considerable amount if you only intend to stay in your new home for a short time. Because the interest rate and monthly payments are likely to be considerably lower for an adjustable rate mortgage, If the difference between the rate for a fixed rate mortgage and an adjustable rate mortgage (the spread) is considerable, you could save several thousand dollars a year in those first few years. In order to figure out if an adjustable rate mortgage is right for you, it’s important for you to consider all of the facts about the loan. You should know the following about the mortgage that you’re considering:

Brain Jenkins is a freelance writer who writes about topics and financial products pertaining to the mortgage industry such an adjustable rate mortgage available from a mortgage company.

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