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Financing Your Home >ARMs
Here is a tip for those who are shopping for Adjustable Rate Mortgages (ARMs): the "margin" is almost as important as the initial rate. The margin is the percentage point above the average yields for Treasury notes on which future rate adjustments will be calculated. Let's compare two hypothetical one-year ARMs. The first may have an initial interest rate of 7% with a 2.5 margin, while the second begins at 6 7/8% with a 2.75 margin. Both loans have rate caps of 2%. Suppose that at the end of the first year of the loan, the average of the one-year Treasury note yield has been 5 1/2%. For each loan, the lenders will add the margin to that 5 1/2% average yield. Thus the interest rate for first loan would increase from 7% to 8%, and the second would go from 6 7/8% to 8 1/4%. While the first ARM had a slightly higher initial rate, it will have lower rates in subsequent years, unless the Treasury note rates increase enough to activate the annual caps on the amount of the increase. There is a wide variance among margins in ARMs offered by competing lenders, and this should be a factor when you decide on your loan.
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Job/personal income growth; population/household growth; housing affordability/appreciation; and current inventory of homes for sale.
The Franich TeamRE/MAX Accord313 Sycamore Valley Rd., WestDanville, CA. 94526Direct: 925-736-1664 Cell: 925-330-2773 Fax: 925-964-0266Email: Judi@JudiFranich.comAs preeminent real estate professionals in our community, we are dedicated to providing the finest service available while breaking new ground and setting new standards through the use of Internet marketing. Because the real estate industry is becoming more sophisticated and challenging every day, you need a professional that understands the industry and is positioned to stay ahead of the game. We can offer top contract negotiation skills and can save you thousands of dollars in buying and/or selling a home. Most important, we listen to your needs!
The Franich TeamRE/MAX Accord313 Sycamore Valley Rd., WestDanville, CA. 94526Direct: 925-736-1664 Cell: 925-330-2773 Fax: 925-964-0266Email: Judi@JudiFranich.com
As preeminent real estate professionals in our community, we are dedicated to providing the finest service available while breaking new ground and setting new standards through the use of Internet marketing. Because the real estate industry is becoming more sophisticated and challenging every day, you need a professional that understands the industry and is positioned to stay ahead of the game. We can offer top contract negotiation skills and can save you thousands of dollars in buying and/or selling a home. Most important, we listen to your needs!
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