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Adjustable Rate Mortgage

An adjustable rate mortgage may be a good option to consider if your client:

  • Think interest rates will fall in the future
  • Plan to stay in the home for a short period of time
  • Expect future income growth payments
Features
  • The mortgage rate will rise and fall with the market interest rates. This means that the monthly principal and interest payments will change depending on the market interest rate at that time.
  • A low mortgage rate is provided during the initial interest rate period. This allows for initial payments to be lower when compared to payments of a fixed rate mortgage. Note that after the initial payment period has expired, the mortgage rate for the loan will fluctuate to the index rate. The lender adds the index rate to a margin to calculate your mortgage rate at each adjustment.
  • This type of financing includes an interest rate cap that sets a limit on how high the mortgage rate can go. A cap limits the maximum amount of the monthly payment will increase at each interest rate adjustment over the life of the loan.
  • This type of loan is available in a variety of term options.

Take Into Consideration

When choosing the loan term, consider the effects of the adjustable rate over time. Consider:

  • Monthly payments may increase when the interest rate adjusts.
  • Monthly payments may change every year after the initial fixed period is over.

Principal

The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage.

Interest

The fee charged for borrowing money.

Initial Interest Rate

This refers to the original interest rate of the mortgage at the time of closing. This rate changes for an adjustable-rate mortgage (ARM). It's also known as "start rate" or "teaser."

Cap

Limits how much the interest rate or the monthly payment can increase, either at each adjustment or during the life of the mortgage. Payment caps don’t limit the amount of interest the lender is earning and may cause negative amortization.

Correspondent and Wholesale Mortgage Services
1800 Parkway Place, Ste 820, Marietta, GA  30067
Office:  (770) 578-3600
wholesalemortgage@amerisbank.com
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