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With an
adjustable rate mortgage (ARM), the interest rate you pay is
adjusted from time to time as the market rates change. Your
adjustment could be daily, monthly, every six months, or more
commonly, once a year. This means as the market adjusts, your
monthly mortgage payment may go up, or it may be reduced.
ARMs are
an attractive means of financing because of their initial "below
market" interest rate. That is, the starting rates on most ARMs
are below current fixed rate levels. And because ARM payments
start off lower than fixed rate mortgage loans, you can usually
qualify for a larger loan amount.
You may
want to consider an ARM if you plan to move in a few years and
therefore are not as concerned about possible rate increases. Or
if you are confident that your income will rise enough over the
coming years to comfortably handle any increases in payments.
The
amount your payment may increase or decrease will depend on the
"annual" and "lifetime" interest rate caps. The caps, which set
a maximum periodic and lifetime adjustment of your mortgage
payment, are pre-set at the closing of your mortgage loan.
Before applying for any ARM product, make sure you are
comfortable with the maximum mortgage payment.
It is
also important to know what index you ARM will be adjusted
against. A common index is the United States One-Year T-Bill.
You can usually find the index your ARM is tied to in the Wall
Street Journal.
Fixed
Rate / Adjustable Combinations
Combined
fixed/adjustable rate mortgage products provide you with the
best of both mortgages. Your interest rate will be fixed for an
agreed upon term and then adjust yearly thereafter. For example,
a 5/1 ARM loan will give you 5 years at a fixed rate, with each
subsequent year at an adjustable rate. With a fixed/adjustable
combination mortgage you receive the benefit of knowing exactly
what your payment will be monthly and the "below market"
advantage of an adjustable loan. American United offers
fixed/adjustable mortgages in 3/1-, 5/1-,7/1-, and 10/1 options.
In today's market, this is a very popular product.
Contact your American United Lending
Partner today for additional information at (800) 555-2035. Or
use Quick Quote to obtain a current rate
quote. |
