Question:

What adjustable rate mortgage (ARM) info do I need to take an ARM?

Answer:

Since an adjustable rate mortgage (ARM) is a tricky type of a mortgage, there is a lot of adjustable rate mortgage (ARM) info that is needed to know to make sure your ARM has better chances to perform nicely after the introductory period ends.

Information to Consider with an Adjustable Rate Mortgage (ARM)

One factor will be the adjustable rate mortgage ARM index - the ARM will be tied to one of many indexes, such as MTA, COFI, LIBOR or many others. To achieve higher predictability on your ARM rate adjustments, get informed about index volatility. While lenders' opinions on ARM indexes vary, many will agree that the COFI index floats at a much slower rate than the others. It simply doesn't go up as much as some others and is very convenient for the borrower when rates are rising.

Other factors to have in mind when taking an ARM are the margin and the adjustment period. The margin is lender-set and is expected to remain the same throughout the lifetime of the loan. Sometimes tying the adjustable rate to a quick index will be compensated with lower margin. The adjustment an ARM is usually annual or bi-annual.

Periodic and lifetime caps are also important to know when taking an ARM. These will be percentages showing possible increase for the adjustment period and for the lifetime of the loan. A common lifetime cap can be 5, 6 or 7 percent for an ARM.

The more information you get the lender to disclose, the better. Also, if you are selling the house within the introductory ARM rate period, you may not even need the index, margin and caps info at all.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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