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Adjustable Rate Mortgage Rates - Tips For Choosing The Right ARM Home Loan For You

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By : Corey Bruhn    99 or more times read
ARM Home loan Shopping Tips

If you are currently shopping around for a mortgage to either purchase a home or refinance your existing mortgage and have thought about taking advantage of the lower rate an ARM home mortgage offers there are few things you need to be aware of. While the process of getting an ARM home mortgage is no different from a regular loan there are few critical parts of the variable rate loan that you should be familiar with.

What You Need To Know About ARM Home Loans

Your Loans Index- The index of your mortgage tells the borrower what financial market your loan is tied into. This is important once your fixed rate expires and your rate starts to adjust. Once this happens your index is added to your loan's margin to figure out your new rate. There are many indexes that banks use but the most familiar are the LIBOR and the MTA. There are both good and bad things about each index and you should discuss them with your lender!

The Margin Of Your ARM- The margin is a number that is placed onto your loan to help figure in your interest rate once your fixed rate period expires. It will be added to the index of your loan and the new rate is a total sum of those numbers. Margins can differ greatly from one bank to another so it is best to shop around and ask not only the interest rate but also the margin of the loan.

Loan Caps- To protect the borrower from a interest rate and payment rising too much, there have been caps put on your loan to limit how much the loan can adjust each period and also the total rate that your loan can go up to. These are called the periodic caps and the loan ceiling caps. The periodic controls the adjustment and is usually set at 1%, the loan ceiling however can go all the way up to 14% so ask about the caps as well.

Where Can I Learn More About ARM Mortgages

To learn more about the options you have when trying to decide to on an Adjustable Rate Mortgage visit where you can read all about adjustable mortgages and make an informed decision for yourself and your family!

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