Types of Loan Programs: Conforming, Jumbo Loans, FRM, ARM, Balloon Mortgage, arm mortgage.#Arm #mortgage


arm mortgage

Arm mortgage

Arm mortgage

Arm mortgage

Arm mortgage

Types of Mortgage Loans

Conventional and Government Loans

Any mortgage loan other than an FHA, VA or an RHS loan is conventional one.

The Federal Housing Administration (FHA), which is part of the U.S. Dept. of Housing and Urban Development (HUD), administers various mortgage loan programs. FHA loans have lower down payment requirements and are easier to qualify than conventional loans. FHA loans cannot exceed the statutory limit. Go to FHA Programs page to get more information.

If you are looking for an FHA home loan right now, please feel free to request personalized rate quotes from HUD-approved mortgage lenders via our website.

VA loans are guaranteed by U.S. Dept. of Veterans Affairs. The guaranty allows veterans and service persons to obtain home loans with favorable loan terms, usually without a down payment. In addition, it is easier to qualify for a VA loan than a conventional loan. Lenders generally limit the maximum VA loan to $203,000. The U.S. Department of Veterans Affairs does not make loans, it guarantees loans made by lenders. VA determines your eligibility and, if you are qualified, VA will issue you a certificate of eligibility to be used in applying for a VA loan.

VA-guaranteed loans are obtained by making application to private lending institutions. If you are interesting in obtaining a VA-guaranteed loan you can try our VA loan request form.

Please see also pamphlets published by VA.

RHS Loan Programs

The Rural Housing Service (RHS) of the U.S. Dept. of Agriculture guarantees loans for rural residents with minimal closing costs and no downpayment. Visit our page RHS programs for details.

Ginnie Mae which is part of HUD guarantees securities backed by pools of mortgage loans insured by these three federal agencies – FHA, or VA, or RHS. Securities are sold through financial institutions that trade government securities.

State and Local Housing Programs

Many states, counties and cities provide low to moderate housing finance programs, down payment assistance programs, or programs tailored specifically for a first time buyer. These programs are typically more lenient on the qualification guidelines and often designed with lower upfront fees. Also, there are often loan assistance programs offered at the local or state level such as MCC (Mortgage Credit Certificate) which allows you a tax credit for part of your interest payment. Most of these programs are fixed rate mortgages and have interest rates lower than the current market.

Conventional loans may be conforming and non-conforming. Conforming loans have terms and conditions that follow the guidelines set forth by Fannie Mae and Freddie Mac. These two stockholder-owned corporations purchase mortgage loans complying with the guidelines from mortgage lending institutions, packages the mortgages into securities and sell the securities to investors. By doing so, Fannie Mae and Freddie Mac, like Ginnie Mae, provide a continuous flow of affordable funds for home financing that results in the availability of mortgage credit for Americans.

Fannie Mae and Freddie Mac guidelines establish the maximum loan amount, borrower credit and income requirements, down payment, and suitable properties. Fannie Mae and Freddie Mac announces new loan limits every year.

The national conforming loan limit for mortgages that finance single-family one-unit properties increased from $33,000 in the early 1970s to $417,000 for 2006-2008, with limits 50 percent higher for four statutorily-designated high cost areas: Alaska, Hawaii, Guam, and the U.S. Virgin Islands. Since early 2008, a series of legislative acts have temporarily increased the one-unit limit to up to $729,750 in certain high-cost areas in the contiguous United States. Permanent limits, which apply to the Enterprises’ acquisitions of certain mortgages originated prior to July 1, 2007, are set under the terms of the Housing and Economic Recovery Act of 2008 (HERA).

For every county and county-equivalent in the country, maximum loan limits for mortgages can be found at: http://www.fhfa.gov/Default.aspx?Page=185

The 2013 conforming loan limits for first mortgages remain at the limits set in 2006, 2007, 2008, 2010 and 2011:


ARM Calculator: Adjustable Rate Home Loan Calculator: Estimate 3, arm mortgage.#Arm #mortgage


Adjustable Rate Mortgage Calculator

Thinking of getting a variable rate loan? Use this tool to figure your expected monthly payments before and after the reset period.

Current ARM Mortgage Rates

Understanding Adjustable-Rates

The U.S. has always been the world capital of consumer choice. Visitors are often overwhelmed by the variety offered in our stores, supermarkets, and service industries. And the mortgage game is no different.

When making a major purchase like a home or RV, Americans have many different borrowing options at their fingertips, such as a fixed-rate mortgage or an adjustable-rate mortgage.

Almost everywhere else in the world, homebuyers have only one real option, the ARM (which they call a variable-rate mortgage).

What Are Adjustable Rate Mortgages?

An ARM is a loan with an interest rate that is adjusted periodically to reflect the ever-changing market conditions.

Usually, the introductory rate lasts a set period of time and adjusts every year afterward until the loan is paid off. An ARM lasts a total of thirty years, and after the set introductory period, your interest cost and your monthly payment will change.

Of course, no one knows the future, but a fixed can help you prepare for it, no matter how the tides turn. If you use an ARM it is harder to predict what your payments will be.

You can predict a rough range of how much your monthly payments will go up or down based on two factors, the index and the margin. While the margin remains the same for the duration of the loan, the index value varies. An index is a frame of reference interest rate published regularly. It includes indexes like U.S. Treasury T-Bills, the 11th District Cost of Funds Index (COFI), and the London Interbank Offered Rate (LIBOR).

Adjustable-Rates vs. Fixed-Rates

Arm mortgageEvery potential homebuyer faces this decision, and there are pros and cons to both kinds of mortgages. What you plan to do both in the near and distant future determines which loan arrangement will be best for you.

The APR of a fixed-rate mortgage (FRM) remains the same for the life of the loan, and most homeowners like the security of locking in a set rate and the ease of a payment schedule that never changes. However, if rates drop dramatically, an FRM would need to be re-financed to take advantage of the shift, and that isn’t easy at all.

An ARM is more of a roller coaster ride that you put your whole house on. It fluctuates with the real estate market and with the economy in general. The sweet five percent deal you have today could shoot up to eight percent if LIBOR goes up.

What Are The Common Reset Points?

The reset point is the date your ARM changes from the introductory rate to the adjustable-rate based on market conditions. Many consumers wrongly believe this honeymoon period of having a preset low monthly payment needs to be as short as it is sweet.

But nowadays, it is not uncommon to set mortgage reset points years down the road. Reset points are typically set between one and five years ahead. Here are examples of the most popular mortgage reset points:

  • 1 Year ARM – Your APR resets every year.
  • 3/1 ARM – Your APR is set for three years, then adjusts for the next 27 years.
  • 5/1 ARM – Your APR is set for five years, then adjusts for the next 25 years.
  • 7/1 ARM – Your APR is set for seven years, then adjusts for the next 23 years.
  • 10/1 ARM – Your APR is set for ten years, then adjusts for the next 20 years.

What is the Difference Between a Standard ARM Loan and Hybrid ARMs?

A hybrid ARM has a honeymoon period where rates are fixed. Typically it is 5 or 7 years, though in some cases it may last either 3 or 10 years.

Some hybrid ARM loans also have less frequent rate resets after the initial grace period. For example a 5/5 ARM would be an ARM loan which used a fixed rate for 5 years in between each adjustment.

A standard ARM loan which is not a hybrid ARM either resets once per year every year throughout the duration of the loan or, in some cases, once every 6 months throughout the duration of the loan.

What do Rates Reset Against?

ARMs are typically tied to one of the following 3 indexes:

  • London Interbank Offered Rate (LIBOR) – The rate international banks charge one another to borrow.
  • 11th District Cost of Funds Index (COFI) – The rate banks in the western U.S. pay depositors.
  • Constant maturity yield of one-year Treasury bills – The U.S. Treasury yield, as tracked by the Federal Reserve Board.

Who Are ARMS Good For?

Adjustable-rate mortgages are not for everyone, but they can look very attractive to people who are either planning to move out of the house in a few years or those who are counting on a significant raise in income in the near future.

Basically, if your reset point is seven years away and you plan to move out of the house before then, you can manage to get out of Dodge before the costlier payment schedule kicks in.

Others who will benefit greatly from the flexibility of an ARM are people who expect a sizeable raise, promotion, or expansion in their careers. They can afford to buy a bigger house right now, and they will have more money to work with in the future when the reset date arrives. When the reset happens if rates haven’t moved up they can refinance into a FRM.

Who Are ARMS Bad For?

ARMs are bad for worrywarts. If life’s little uncertainties make you feel queasy, you may worry about the future of interest rates every waking moment. But don’t worry – you won’t end up losing the farm (or your signed Don Drysdale baseball card) because ARMs have caps on them.

A cap is a ceiling, or a limit on the amount your loan rate can increase annually for the duration of the loan. Adjustable-rate mortgage caps are usually set between two and five percent, and they carry a maximum yearly increase of two percent.

That is not exactly risky proposition, but it can appear so to a non-gambler.

You can run the numbers in advance to estimate the monthly cost at different APRs. Our above calculator does this automatically based on the cap you enter.

Compare Your Options

Arm mortgageCompare IO ARMs or fixed, adjustable interest-only loans side by side. Arm mortgage

Avantages And Disadvantages

  • Lower payments and rates early in the loan term, allowing borrowers to buy larger, more expensive homes.
  • ARM holders can take advantage of falling rates without lifting a finger, avoiding the inconvenience and high cost of refinancing, including a new set of closing costs and transaction fees.
  • It’s an affordable way for borrowers with limited funds to buy a house if they don’t plan on living in one place for a long time.
  • Rates and monthly payments can rise dramatically over the course of a 30-year commitment. A six percent ARM can skyrocket to eleven percent in as little as three years.
  • The first adjustment after your initial set period can be more shocking than any sticker you’ve ever seen because annual caps sometimes don’t apply to the first payments after the reset point arrives. Be sure to read the small print!
  • ARMs are complex agreements, and novice borrowers can easily be misled and bamboozled by slick talk about margins, caps, ARM indexes, and other industry jargon – particularly if the lender is somewhat shady.

Borrower Beware

ARMs are not for the faint-hearted. They offer a better life to those who want lower payments now in exchange for spending more down the road. But make no mistake, your monthly payments will likely increase when your rate is adjusted.

You must be prepared financially for the end of the honeymoon. Because caps often don’t apply to the one-time initial adjustment, you could see a worst-case scenario of your six percent rate adjusting to ten or twelve percent a year if interest rates in the overall economy shoot up.

If you found this guide helpful you may want to consider reading our comprehensive guide to adjustable-rate mortgages.

You can also download an ARM loan worksheet bring it to your financial institution. We offer versions in the following formats: PDF, Word Excel.


Mortgage Calculators: Amortization Tables, Accelerated Payments, Biweekly Payments, mortgage calculator arm.#Mortgage #calculator #arm


mortgage calculator arm

Mortgage calculator arm

Mortgage calculator arm

Mortgage calculator arm

Mortgage calculator arm

Lets you determine monthly mortgage payments and see complete amortization tables.

Mortgage calculator armHow Advantageous Are Extra Payments?

By making additional monthly payments you will be able to repay your loan much more quickly. Find out how your monthly, yearly, or one-time pre-payments influence the loan term and the interest paid over the life of loan. Make additional 1/12 of monthly payments (a popular ‘do-it-yourself’ biweekly) or an additional monthly payment once a year.

Mortgage calculator armSimple Option ARM Calculator

Computes minimum, interest-only and fully amortizing 30-, 15- and 40-year payments.

Mortgage calculator armAdvanced Option ARM Calculator with Minimum Payment Change Cap

Allows you to create a complete option ARM loan amortization table (with standard and neg-am recasts, automatically estimated possible future index changes, various fixed payment periods, interest rate rounding to the nearest 1/8 of one percentage, and more). See what happens if you always select the minimum payment option.

< Please see: Using Pay Option ARM Calculator

Mortgage calculator armWhich ARM Index Is Better?

Mortgage calculator armMortgage Pre-Qualifier

Mortgage Pre-Qualifier will determine the income required to qualify for the particular loan using the specified qualifying ratios.

Mortgage calculator armHow Much Can You Borrow?

The calculator lets you see how various changes to your income, liabilities, and mortgage terms affect the loan amount you can borrow.

Mortgage calculator armBlended Rate Calculator

Calculates a first and second mortgage blended rate.

Mortgage calculator arm‘True bi-weekly’ payment calculator

Prints yearly amortization tables. With bi-weekly payments, you pay half of the monthly mortgage payment every 2 weeks, rather than the full balance once a month. This is comparable to 13 monthly payments a year, which can result in faster payoff and lower overall interest costs.

Mortgage calculator armAnother ‘true bi-weekly’ payment calculator

Builds complete bi-weekly amortization tables.

Mortgage calculator armTrue bi-weekly vs standard bi-weekly

Shows how much you will save if you calculate interest for two-week intervals and apply the bi-weekly payments less the interest to reduce principal every two weeks, instead of having your money withdrawn from your bank account every two weeks by your lender and making a full mortgage payment once a month plus one additional payment once a year out of a special account, managed by the lender. Complete amortization tables are available.

Mortgage calculator arm


Mortgage Calculator, mortgage calculator arm.#Mortgage #calculator #arm


Mortgage Calculator

Mortgage calculator arm

$1,115.57 / Month

Mortgages

A mortgage is a loan secured by a property usually a real estate property. A real estate mortgage usually includes the following key components:

  • Loan Amount the amount borrowed from a lender or bank. The maximum loan amount one can borrow normally correlates with household income or affordability. To estimate an affordable amount, please use our House Affordability Calculator.
  • Down Payment the upfront payment of the purchase, usually in a percentage of the total price. In the US, if the down payment is less than 20% of the total property price, typically, private mortgage insurance (PMI) is required to be purchased until the principal arrives at less than 80% or 78% of the total property price. The PMI rate normally ranges from 0.3%-1.5% (generally around 1%) of the total loan amount, depending on various factors. A general rule-of-thumb is that the higher the down payment, the more favorable the interest rate.
  • Loan Term the agreed upon length of time the loan shall be repaid in full. The most popular lengths are 30 years and 15 years. Normally, the shorter the loan term, the lower the interest rate.
  • Interest Rate the rate of interest charged by a mortgage lender. It can be “fixed” (otherwise known as a fixed-rate mortgage, or FRM), or “adjustable” (otherwise known as an adjustable rate mortgage, or ARM). The calculator above is only usable for fixed rates. For ARMs, interest rates are generally fixed for a period of time, after which they will be periodically “adjusted” based on market indices. ARMs transfer part of the risk to borrowers. Therefore, the initial interest rates are normally 0.5% to 2% lower than FRM with the same loan term. Mortgage interest rates are normally expressed in Annual Percentage Rate (APR), which is sometimes called nominal APR or effective APR. It is the interest rate expressed as a periodic rate multiplied by the number of compounding periods in a year. For example, if a mortgage rate is 6% APR, it means the borrower will have to pay 6% divided by twelve, which comes out to 0.5% in interest every month.

The most common way to repay a mortgage loan is to make monthly, fixed payments to the lender. The payment contains both the principal and the interest. For a typical 30-year loan, the majority of the payments in the first few years cover the interest.

Costs Associated with Mortgages and Home Ownership

Commonly, monthly mortgage payments will consist of the bulk of the financial costs associated with owning a house, but there are other important costs to keep in mind. In some cases, these costs combined can be more than the mortgage payments. Be sure to keep these costs in mind when planning to purchase a home.

Because the recurring costs perpetuate throughout the lives of mortgages (exception being PMI), they are a significant financial factor. Property Taxes, Home Insurance, HOA Fee, and Other Costs increase with time as a byproduct of moderate inflation. There are optional inputs within the calculator for annual percentage increases. Using these wisely can result in more accurate calculations.

  • Property Taxes a tax that property owners pay to governing authorities. In the U.S., property tax is usually managed by municipal or county government. The annual real estate tax in the U.S. varies by location, normally ranging from 1% to 4% of the property value. In some extreme cases, the tax rate can be 10% or higher.
  • Home Insurance an insurance policy that protects the owner from accidents that may happen to the private residence or other real estate properties. Home insurance can also contain personal liability coverage, which protects against lawsuits involving injuries that occur on and off the property. The cost of home insurance varies according to factors such as location, condition of property, and coverage amount. Typically, the annual cost can range from 0.1% to 5% of the property value.
  • Private Mortgage Insurance (PMI) protects the mortgage lender if the borrower is unable to repay. In the U.S. specifically, if the down payment is less than 20% of the property value, the lender will normally require the borrower to purchase PMI until the loan-to-value ratio (LTV) reaches 80% or 78%. PMI price varies according to factors such as down payment, size of the loan, and credit of the borrower. The annual cost typically ranges from 0.3% to 1.5% of the loan amount.
  • HOA Fee a fee that is imposed on the property owner by an organization that maintains and improves property and environment of the neighborhoods that the specific organization covers. Common real estate that requires HOA fees include condominiums, townhomes, and some single-family communities. Annual HOA fees usually amount to less than one percent of the property value.
  • Other Costs includes utilities, home maintenance costs, and anything pertaining to the general upkeep of the property. Many miscellaneous costs can be deceptively high and it is important to consider them in the big picture. It is common to spend 1% or more of the property value on annual maintenance alone.

While these costs aren’t contained within calculations, they are still important to keep in mind.

  • Closing Costs the fees paid at the closing of a real estate transaction. It is not a recurring fee yet it can be expensive. In the U.S., even though not all are applicable, the closing cost on a mortgage can include attorney fee, title service cost, recording fee, survey fee, property transfer tax, brokerage commission, mortgage application fee, points, appraisal fee, inspection fee, home warranty, pre-paid home insurance, pro-rata property taxes, pro-rata homeowner association dues, pro-rata interest, and more. Sellers will share some of these costs. It is not unusual for a buyer to pay $10,000 in total closing costs on a $300,000 transaction.
  • Initial Renovations Some buyers invest money into renovations, features, or updates before moving in. Examples may be changing the flooring, repainting the walls, or even adding a patio.

Besides these, new furniture, new appliances, and moving costs are also common non-recurring costs of a home purchase.

Early Repayment and Extra Payments

For many situations, mortgage borrowers may want to pay off mortgages earlier rather than later, either in whole or in part, for reasons including but not limited to interest savings, home selling, or refinancing. Most mortgage lenders allow borrowers to pay off up to 20% of the loan balance each year but few may have prepayment penalties for one-time payoffs, mainly to prevent refinancing too soon (which will affect the lender’s profit). One-time payoff due to home selling is normally exempt from a prepayment penalty. The penalty amount typically decreases with time until it phases out within 5 years. Few lenders charge prepayment penalties regardless of home-selling or refinancing, but be sure to review the loan terms carefully anyway just in case.

Some borrowers may want to pay off their mortgage loan earlier to reduce interest. Typically, there are three ways to do so. The methods can be used in combination or individually.

  1. Refinance to a loan with a shorter term Normally, interest rates of shorter term mortgage loans are lower. Therefore, borrowers not only repay their loan balances faster, but receive lower and more favorable interest rates on their mortgages. Keep in mind that this imposes higher financial pressure on the borrower due to higher monthly mortgage payments. Also, there may be fees or penalties involved.
  2. Make extra payments the majority of the earliest mortgage payments will be for interest instead of principal on typical long-term mortgage loan. Any extra payments will decrease loan balances, therefore decreasing interest and pay off earlier in the long run. Some people form the habit of paying extra every month, while others pay extra whenever they can. There are optional inputs to include many extra payments, and it can be helpful to compare the results of supplementing mortgages with extra payments and without.
  3. Make biweekly (once every two weeks) payments of half month’s payment instead Since there are 52 weeks each year, this is the equivalent of making 13 months of mortgage repayments a year instead of 12. Utilizing this method, mortgages can be paid off earlier. Displayed in the calculated results are biweekly payments for comparison purposes.

The Calculator has the tools to help evaluate the options. Please be aware that the rates on mortgages tend to be very low compared with other types of loans. Also, mortgage interest is tax-deductible, and home equity accumulated may be counted against borrowers when applying for need-based college aid. Be sure to consider comprehensively before paying off mortgage loans earlier.


ARM Calculator: Adjustable Rate Home Loan Calculator: Estimate 3, what is an arm mortgage.#What #is


Adjustable Rate Mortgage Calculator

Thinking of getting a variable rate loan? Use this tool to figure your expected monthly payments before and after the reset period.

Current ARM Mortgage Rates

Understanding Adjustable-Rates

The U.S. has always been the world capital of consumer choice. Visitors are often overwhelmed by the variety offered in our stores, supermarkets, and service industries. And the mortgage game is no different.

When making a major purchase like a home or RV, Americans have many different borrowing options at their fingertips, such as a fixed-rate mortgage or an adjustable-rate mortgage.

Almost everywhere else in the world, homebuyers have only one real option, the ARM (which they call a variable-rate mortgage).

What Are Adjustable Rate Mortgages?

An ARM is a loan with an interest rate that is adjusted periodically to reflect the ever-changing market conditions.

Usually, the introductory rate lasts a set period of time and adjusts every year afterward until the loan is paid off. An ARM lasts a total of thirty years, and after the set introductory period, your interest cost and your monthly payment will change.

Of course, no one knows the future, but a fixed can help you prepare for it, no matter how the tides turn. If you use an ARM it is harder to predict what your payments will be.

You can predict a rough range of how much your monthly payments will go up or down based on two factors, the index and the margin. While the margin remains the same for the duration of the loan, the index value varies. An index is a frame of reference interest rate published regularly. It includes indexes like U.S. Treasury T-Bills, the 11th District Cost of Funds Index (COFI), and the London Interbank Offered Rate (LIBOR).

Adjustable-Rates vs. Fixed-Rates

What is an arm mortgageEvery potential homebuyer faces this decision, and there are pros and cons to both kinds of mortgages. What you plan to do both in the near and distant future determines which loan arrangement will be best for you.

The APR of a fixed-rate mortgage (FRM) remains the same for the life of the loan, and most homeowners like the security of locking in a set rate and the ease of a payment schedule that never changes. However, if rates drop dramatically, an FRM would need to be re-financed to take advantage of the shift, and that isn’t easy at all.

An ARM is more of a roller coaster ride that you put your whole house on. It fluctuates with the real estate market and with the economy in general. The sweet five percent deal you have today could shoot up to eight percent if LIBOR goes up.

What Are The Common Reset Points?

The reset point is the date your ARM changes from the introductory rate to the adjustable-rate based on market conditions. Many consumers wrongly believe this honeymoon period of having a preset low monthly payment needs to be as short as it is sweet.

But nowadays, it is not uncommon to set mortgage reset points years down the road. Reset points are typically set between one and five years ahead. Here are examples of the most popular mortgage reset points:

  • 1 Year ARM – Your APR resets every year.
  • 3/1 ARM – Your APR is set for three years, then adjusts for the next 27 years.
  • 5/1 ARM – Your APR is set for five years, then adjusts for the next 25 years.
  • 7/1 ARM – Your APR is set for seven years, then adjusts for the next 23 years.
  • 10/1 ARM – Your APR is set for ten years, then adjusts for the next 20 years.

What is the Difference Between a Standard ARM Loan and Hybrid ARMs?

A hybrid ARM has a honeymoon period where rates are fixed. Typically it is 5 or 7 years, though in some cases it may last either 3 or 10 years.

Some hybrid ARM loans also have less frequent rate resets after the initial grace period. For example a 5/5 ARM would be an ARM loan which used a fixed rate for 5 years in between each adjustment.

A standard ARM loan which is not a hybrid ARM either resets once per year every year throughout the duration of the loan or, in some cases, once every 6 months throughout the duration of the loan.

What do Rates Reset Against?

ARMs are typically tied to one of the following 3 indexes:

  • London Interbank Offered Rate (LIBOR) – The rate international banks charge one another to borrow.
  • 11th District Cost of Funds Index (COFI) – The rate banks in the western U.S. pay depositors.
  • Constant maturity yield of one-year Treasury bills – The U.S. Treasury yield, as tracked by the Federal Reserve Board.

Who Are ARMS Good For?

Adjustable-rate mortgages are not for everyone, but they can look very attractive to people who are either planning to move out of the house in a few years or those who are counting on a significant raise in income in the near future.

Basically, if your reset point is seven years away and you plan to move out of the house before then, you can manage to get out of Dodge before the costlier payment schedule kicks in.

Others who will benefit greatly from the flexibility of an ARM are people who expect a sizeable raise, promotion, or expansion in their careers. They can afford to buy a bigger house right now, and they will have more money to work with in the future when the reset date arrives. When the reset happens if rates haven’t moved up they can refinance into a FRM.

Who Are ARMS Bad For?

ARMs are bad for worrywarts. If life’s little uncertainties make you feel queasy, you may worry about the future of interest rates every waking moment. But don’t worry – you won’t end up losing the farm (or your signed Don Drysdale baseball card) because ARMs have caps on them.

A cap is a ceiling, or a limit on the amount your loan rate can increase annually for the duration of the loan. Adjustable-rate mortgage caps are usually set between two and five percent, and they carry a maximum yearly increase of two percent.

That is not exactly risky proposition, but it can appear so to a non-gambler.

You can run the numbers in advance to estimate the monthly cost at different APRs. Our above calculator does this automatically based on the cap you enter.

Compare Your Options

What is an arm mortgageCompare IO ARMs or fixed, adjustable interest-only loans side by side. What is an arm mortgage

Avantages And Disadvantages

  • Lower payments and rates early in the loan term, allowing borrowers to buy larger, more expensive homes.
  • ARM holders can take advantage of falling rates without lifting a finger, avoiding the inconvenience and high cost of refinancing, including a new set of closing costs and transaction fees.
  • It’s an affordable way for borrowers with limited funds to buy a house if they don’t plan on living in one place for a long time.
  • Rates and monthly payments can rise dramatically over the course of a 30-year commitment. A six percent ARM can skyrocket to eleven percent in as little as three years.
  • The first adjustment after your initial set period can be more shocking than any sticker you’ve ever seen because annual caps sometimes don’t apply to the first payments after the reset point arrives. Be sure to read the small print!
  • ARMs are complex agreements, and novice borrowers can easily be misled and bamboozled by slick talk about margins, caps, ARM indexes, and other industry jargon – particularly if the lender is somewhat shady.

Borrower Beware

ARMs are not for the faint-hearted. They offer a better life to those who want lower payments now in exchange for spending more down the road. But make no mistake, your monthly payments will likely increase when your rate is adjusted.

You must be prepared financially for the end of the honeymoon. Because caps often don’t apply to the one-time initial adjustment, you could see a worst-case scenario of your six percent rate adjusting to ten or twelve percent a year if interest rates in the overall economy shoot up.

If you found this guide helpful you may want to consider reading our comprehensive guide to adjustable-rate mortgages.

You can also download an ARM loan worksheet bring it to your financial institution. We offer versions in the following formats: PDF, Word Excel.


30-Year Fixed vs, mortgage arm.#Mortgage #arm


30-Year Fixed vs. 5/1 ARM

Mortgage arm

Here we go again…it’s that special time where I compare two popular loan programs to see how they stack up against each other. Today’s match-up: “30-year fixed vs. 5/1 ARM.”

Everyone has heard of the 30-year fixed-rate mortgage – it’s far and away the most popular type of loan out there. Why? Because it s the easiest to understand, and presents no risk of adjusting during the entire loan term.

But what about the 5/1 ARM? Do you even know what a 5/1 ARM is? What the heck is that slash doing there!? It looks confusing.

Mortgage arm

Put simply, the 5/1 ARM is an adjustable-rate mortgage with a 30-year term that’s fixed for the first five years and adjustable for the remaining 25 years. That means it s a hybrid ARM. Partially fixed, and partially adjustable.

After the first five years are up, the interest rate can adjust once annually, both up or down. That s the 5/1 broken down for you. Disregard that pesky slash.

It’s a pretty popular ARM product, if not the most popular. And just about all mortgage lenders offer it, including ING, via its Easy Orange Mortgage.

5/1 ARM Rates Are Lower. That s the Draw

Mortgage arm

Well, the biggest advantage to the 5/1 ARM is the fact that you get a lower mortgage rate than you would if you opted for a traditional 30-year fixed.

As you can see from the chart I created above, the 5/1 ARM is always cheaper than the 30-year fixed. That s the trade-off for that lack of mortgage rate stability.

But how much lower are 5/1 ARM rates? Currently, the spread is 0.63%, with the 30-year averaging 3.78 percent and the 5/1 ARM coming in at 3.15 percent, per Freddie Mac data.

Since Freddie began tracking the five-year ARM back in 2005, the spread has been as small as 0.27% and as large as 1.30% in 2011.

If the spread were only 0.25%, it d be hard to rationalize going with the uncertainty of the ARM. Conversely, if the spread were a full percentage point or higher, it d be pretty tempting to choose the ARM and save money for at least 60 months.

Let s look at an example of the potential savings:

Loan amount: $350,000

30-year fixed monthly payment: $1,626.87

5/1 ARM monthly payment: $1,504.08

So you’d be looking at a difference in monthly mortgage payment of roughly $122, or $1,464 annually ($7,320 over 5 years), using our example from above. Not bad, right?

You d also pay down your mortgage faster because more of each payment would go toward principal as opposed to interest. So you actually benefit twice. You pay less and your mortgage balance is smaller after five years.

After five years, the outstanding balance would be $315,427.87 versus $312,017.26 on the five-year ARM. That s roughly another $3,400 in savings for a total benefit of nearly $11,000.

Discussion over, the ARM wins! Right? Well, there’s just one little problem

It might not always be this good. In fact, you might only save money for the first five years of your 30-year loan.

After those initial five years are up, you could face an interest rate hike, meaning your 5/1 ARM could go from 3.25 percent to 4.50 percent or higher, depending on the associated margin and mortgage index.

ARMs Are Cheap But Will Likely Head Higher

Currently, mortgage indexes are super low, but they’re expected to rise in coming years as the economy gets back on track, which it will eventually.

And you should always prepare for a higher interest rate adjustment if you’ve got an ARM. In fact, lenders typically qualify you at a higher rate to ensure you can make more expensive payments in the future should your ARM adjust higher.

So that’s the big risk with the 5/1 ARM. If you don’t plan to sell or refinance before those first five years are up, the 30-year fixed may be the better choice.

Although, if you sell or refinance within say seven or eight years, the 5/1 ARM could still make sense given the savings realized during the first five years. And most people either sell or refinance within 10 years.

Just be sure you can actually handle a larger monthly mortgage payment should your rate adjust higher. And realize that refinancing won t always be an option you may not qualify, or rates may be too expensive to justify a refi. It s never a guarantee.

If you actually plan to pay off your mortgage, an ARM could be a bad idea unless you seriously luck out with rate adjustments. Or you serially refinance and pay extra to shorten the amortization period. Otherwise, there s a good chance you ll pay a lot more than you would have had you gone with the 30-year fixed.

Why? Because each time you refinance to another ARM, you re getting a brand new 30-year term. That means more interest is paid over a longer period of time, even if the rate is lower.

However, if you’re a savvy investor and have a healthy risk-appetite, the 5/1 ARM could mean some serious savings, especially if the extra money is invested somewhere else with a better return for your money.

Five years not enough for you? Check out the 30-year fixed vs. the 7-year ARM, which provides another two years of interest rate stability. The rate may not be as low, but you ll get a little more time before that first rate adjustment.


Arm rates, arm rates.#Arm #rates


ARMs Adjustable Rate Mortgages

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Arm rates

ARM Features

  • Rate and payment are fixed for 5, 7, or 10 years then . . .
  • They can change every 1 year thereafter (every 5 years for the 5/5)
  • Lower starting rate than fixed-rate mortgages
  • Up to 30 year term
  • Loans up to 95% of home value
  • No point option
  • DCU service for the life of your loan
  • For home purchase or refinance
  • Borrow for 1 to 4 family primary residences
  • Can use to finance condominiums and townhouses

Please refer to Details and Rates tabs for additional information and important disclosures.

Quick and Easy

Arm ratesI refinanced my home with a 5/1 ARM. It took just 44 days from my initial online application to closing the loan. The process was easy, communication good, fees were just as described upfront, and a great rate. Arm rates

Lilly1, Westborough, MA

What is an ARM or Adjustable Rate Mortgage?

  • A 30-year mortgage
  • In the case of a 5/5 ARM, the rate is fixed for the first five years, and can change down or up only once every five years thereafter until the end the loan.
  • In the case of a 5/1, 7/1, or 10/1 ARM, the rate is fixed for first five to ten years, then can change up or down once every year thereafter until the end of the loan.
  • The starting interest rate is almost always below a 30-Year Fixed-Rate Mortgage.
  • The shorter the initial fixed period, the lower the starting rate usually is.

If you are only going to be in your current home 5 to 10 years like most people, why pay a higher rate to fix your rate for 30 years? You can save a lot of interest by choosing an ARM. Learn more about when an ARM is the right choice.

Main Benefits of the ARMs

  • Low starting rates

Four options for ARMs periods

  • 5/5 ARM This is the best option for most members. It’s a 30-year mortgage that starts out with a low fixed rate for 5 years. Thereafter, the interest rate may change no more than 2% down or up every 5 years and 5% in either direction over the life of the loan. That’s just one adjustment in the first 10 years.
  • 5/1 ARM This 30-year mortgage starts out with a low fixed rate for 5 years. Thereafter, the interest rate may change no more than 2% each year and 5% over the life of the loan.
  • 7/1 ARM This 30-year mortgage starts out with a low fixed rate for 7 years. Thereafter, the first rate change will have a cap of 5% and each additional rate change will be capped at 2%. The life time cap will be 5%.
  • 10/1 ARM This 30-year mortgage starts out with a low fixed rate for 10 years. Thereafter, the interest rate may change no more than 2% each year and 5% over the life of the loan.
  • Lower starting rate than fixed-rate mortgages
  • Competitive rates for loans of every size
  • Up to 30 year term A longer term helps keep monthly payments more affordable. A shorter term saves you interest and builds equity faster.
  • Loans up to 95% of home value However, if you borrow no more than 80%, you’ll avoid the expense of private mortgage insurance (PMI). Loan to value is determined by the total loan amount divided by the home value. The home value is the lesser of either the purchase price or appraised value.
  • No point option Typically chosen for refinances. Paying points reduces your starting rate. We can help you decide what’s best for your situation.
  • DCU service for the life of your mortgage We’ll handle all your payments, escrow, and questions. You’ll have access to your mortgage account through Online Banking, Easy Touch Telephone Teller, DCU ATMs, and our branches for getting information and making electronic payments. Most important, you’ll never have to worry about late or missing payments if your mortgage is sold.
  • For home purchase or refinance
  • Borrow for 1 to 4 family primary residences
  • Can use to finance condominiums and townhouses
  • When is an ARM the right choice?

    Consider your answers to these questions when considering your options.

    • How long do you intend to live in the home? On average, people move or refinance their mortgages every 5 to 7 years. If you expect to remain in your home longer than 7 years, a 5/5 Mortgage could make more sense because your rate and payment will rarely change. If you expect to move or refinance sooner, a 5/1 Mortgage may be more economical choice. You have a lower starting rate fixed for the first few years.
    • Do you need the smallest possible payment? Fixed-rate mortgages have the highest rates because the lender assumes all the risk that rates may go up. If you need smaller payments to get into a home, ARMs have lower starting rates and payments than fixed.
    • Is a stable payment more important to you than the lowest rate? The ARMs with an initial fixed-rate period give you stable rate and payment for up to ten years. Realize that if you want to fix your payment longer than that, it could cost you thousands in extra interest.
    • How high are mortgage rates in general and where might they be moving? Predicting where mortgage rates will move is impossible to do with any certainty. Market rates are generally determined based on the inflation expectations of bond-market investors, foreign demand for US Treasury securities, and the impact of Federal Reserve monetary policy. However, we can tell you if current rates are relatively high or low based on recent history. Generally anything under 5% is low. If you’ll be in a house longer than 7 years, you might prefer 5/5 ARM or a Fixed-Rate Mortgage. On the other hand, if rates are 9% or above, an ARM with a shorter fixed period may be better. Rates that high generally don’t stay high for long. Your rate will adjust downward when rates fall without the cost of refinancing.

    Types of Loan Programs: Conforming, Jumbo Loans, FRM, ARM, Balloon Mortgage, arm mortgage.#Arm #mortgage


    arm mortgage

    Arm mortgage

    Arm mortgage

    Arm mortgage

    Arm mortgage

    Types of Mortgage Loans

    Conventional and Government Loans

    Any mortgage loan other than an FHA, VA or an RHS loan is conventional one.

    The Federal Housing Administration (FHA), which is part of the U.S. Dept. of Housing and Urban Development (HUD), administers various mortgage loan programs. FHA loans have lower down payment requirements and are easier to qualify than conventional loans. FHA loans cannot exceed the statutory limit. Go to FHA Programs page to get more information.

    If you are looking for an FHA home loan right now, please feel free to request personalized rate quotes from HUD-approved mortgage lenders via our website.

    VA loans are guaranteed by U.S. Dept. of Veterans Affairs. The guaranty allows veterans and service persons to obtain home loans with favorable loan terms, usually without a down payment. In addition, it is easier to qualify for a VA loan than a conventional loan. Lenders generally limit the maximum VA loan to $203,000. The U.S. Department of Veterans Affairs does not make loans, it guarantees loans made by lenders. VA determines your eligibility and, if you are qualified, VA will issue you a certificate of eligibility to be used in applying for a VA loan.

    VA-guaranteed loans are obtained by making application to private lending institutions. If you are interesting in obtaining a VA-guaranteed loan you can try our VA loan request form.

    Please see also pamphlets published by VA.

    RHS Loan Programs

    The Rural Housing Service (RHS) of the U.S. Dept. of Agriculture guarantees loans for rural residents with minimal closing costs and no downpayment. Visit our page RHS programs for details.

    Ginnie Mae which is part of HUD guarantees securities backed by pools of mortgage loans insured by these three federal agencies – FHA, or VA, or RHS. Securities are sold through financial institutions that trade government securities.

    State and Local Housing Programs

    Many states, counties and cities provide low to moderate housing finance programs, down payment assistance programs, or programs tailored specifically for a first time buyer. These programs are typically more lenient on the qualification guidelines and often designed with lower upfront fees. Also, there are often loan assistance programs offered at the local or state level such as MCC (Mortgage Credit Certificate) which allows you a tax credit for part of your interest payment. Most of these programs are fixed rate mortgages and have interest rates lower than the current market.

    Conventional loans may be conforming and non-conforming. Conforming loans have terms and conditions that follow the guidelines set forth by Fannie Mae and Freddie Mac. These two stockholder-owned corporations purchase mortgage loans complying with the guidelines from mortgage lending institutions, packages the mortgages into securities and sell the securities to investors. By doing so, Fannie Mae and Freddie Mac, like Ginnie Mae, provide a continuous flow of affordable funds for home financing that results in the availability of mortgage credit for Americans.

    Fannie Mae and Freddie Mac guidelines establish the maximum loan amount, borrower credit and income requirements, down payment, and suitable properties. Fannie Mae and Freddie Mac announces new loan limits every year.

    The national conforming loan limit for mortgages that finance single-family one-unit properties increased from $33,000 in the early 1970s to $417,000 for 2006-2008, with limits 50 percent higher for four statutorily-designated high cost areas: Alaska, Hawaii, Guam, and the U.S. Virgin Islands. Since early 2008, a series of legislative acts have temporarily increased the one-unit limit to up to $729,750 in certain high-cost areas in the contiguous United States. Permanent limits, which apply to the Enterprises’ acquisitions of certain mortgages originated prior to July 1, 2007, are set under the terms of the Housing and Economic Recovery Act of 2008 (HERA).

    For every county and county-equivalent in the country, maximum loan limits for mortgages can be found at: http://www.fhfa.gov/Default.aspx?Page=185

    The 2013 conforming loan limits for first mortgages remain at the limits set in 2006, 2007, 2008, 2010 and 2011:


    The 5, arm mortgage.#Arm #mortgage


    The 5/5 ARM Loan Just Might be the Best Mortgage Loan

    Arm mortgage

    Want the lower initial interest rate of an adjustable-rate mortgage (ARM) with at least some of the stability of a fixed-rate loan? The 5/5 ARM might be an option.

    This relatively new loan is popular among consumers who want low monthly payments but don’t want to worry each year that this payment might rise. That’s because the interest rate attached to a 5/5 ARM doesn’t reset or adjust as often as it does with a traditional loan.

    Is it Right for You?

    That doesn’t mean that the 5/5 ARM is the right mortgage choice for all borrowers. Even though there is less financial risk than with traditional ARMs, there is still some.

    As with all ARMs, you are taking a little bit of a gamble, said John Walsh, Chief Executive Officer of Milford, Connecticut-based Total Mortgage. If after you set your interest rate for five years interest rates start decreasing, then you made the wrong decision. If rates start increasing after you set your initial rate, then you made the right decision for those five years.

    Traditional ARMs are attractive because they come with lower initial interest rates. But they also come with higher risk: After a set number of years often five or seven years, but perhaps as many as 10 in which the interest rate with an ARM remains unchanged, it then adjusts every year, rising or falling according to which economic indices the ARM is attached to.

    An ARM might be tied to the London Interbank Offered Rate, better known by the acronym LIBOR. After an ARM’s fixed-rate period ends, each year that loan’s interest rate will rise or fall depending on what’s happening with the LIBOR index.

    There is a bit of a safety net built into most ARMs. They’ll usually come with a cap that limits how much monthly payments can rise once the loan enters its adjustable period. An ARM might have a cap of 2% plus the one-year Libor index, for example.

    That’s complicated, so it’s important to ask your lender just how big of a jump your mortgage payment can take during its adjustable years. If you can’t handle the maximum possible increase? An ARM might not be for you.

    Advantages of a 5/5 ARM

    A 5/5 ARM, though, is a bit different. Lenders advertise it as a loan product that combines the stability of a fixed-rate loan with the low initial payments of an ARM.

    Like all ARMs, the 5/5 ARM comes with a fixed-rate period. In this version, the interest rate doesn’t change for five years. After this set period ends, the rate adjusts. But it then remains at its new level for five more years instead of adjusting every 12 months.

    And the 5/5 ARM will continue in this pattern until borrowers pay it off, sell their homes, or refinance to a new loan. The interest rate will remain in place for five years, adjust, remain in place for five more years, adjust, and so on.

    Most 5/5 ARMs come with caps, too. If your interest rate cap is 2%, your rate can’t rise higher than that level during each adjustment period. This cap is important, letting you calculate your worst-case-scenario payment.

    Say you start your 5/5 ARM with an interest rate of 3.25%. If your interest rate cap is 2%, rate can only jump to a maximum of 5.25% when your loan hits its first adjustment period after five years. That comes out to an average interest rate of 4.25% for the first 10 years of this particular 5/5 ARM.

    Peter Grabel, Managing Director of Luxury Mortgage Corp. in Stamford, Connecticut, says that a 5/5 ARM might be a good choice for a younger couple looking to buy a first home. The lower initial interest rate means that this younger couple might be able to get into a larger home than they otherwise would have if they instead sought out a traditional fixed-rate mortgage with a higher interest rate.

    But borrowers who apply for a 5/5 ARM need to be certain that they can afford the higher mortgage payment that might kick in after five years, Grabel said.

    Maybe five years from now this young couple will be making more money, Grabel said. They might be able to afford a higher interest rate then. For people willing to take a little gamble, this is a good loan choice: They pay less now while paying potentially more in years six to 10.

    Have you considered a 5/5 ARM? Why or why not?


    30-Year Fixed vs, arm mortgage.#Arm #mortgage


    30-Year Fixed vs. 5/1 ARM

    Arm mortgage

    Here we go again…it’s that special time where I compare two popular loan programs to see how they stack up against each other. Today’s match-up: “30-year fixed vs. 5/1 ARM.”

    Everyone has heard of the 30-year fixed-rate mortgage – it’s far and away the most popular type of loan out there. Why? Because it s the easiest to understand, and presents no risk of adjusting during the entire loan term.

    But what about the 5/1 ARM? Do you even know what a 5/1 ARM is? What the heck is that slash doing there!? It looks confusing.

    Arm mortgage

    Put simply, the 5/1 ARM is an adjustable-rate mortgage with a 30-year term that’s fixed for the first five years and adjustable for the remaining 25 years. That means it s a hybrid ARM. Partially fixed, and partially adjustable.

    After the first five years are up, the interest rate can adjust once annually, both up or down. That s the 5/1 broken down for you. Disregard that pesky slash.

    It’s a pretty popular ARM product, if not the most popular. And just about all mortgage lenders offer it, including ING, via its Easy Orange Mortgage.

    5/1 ARM Rates Are Lower. That s the Draw

    Arm mortgage

    Well, the biggest advantage to the 5/1 ARM is the fact that you get a lower mortgage rate than you would if you opted for a traditional 30-year fixed.

    As you can see from the chart I created above, the 5/1 ARM is always cheaper than the 30-year fixed. That s the trade-off for that lack of mortgage rate stability.

    But how much lower are 5/1 ARM rates? Currently, the spread is 0.63%, with the 30-year averaging 3.78 percent and the 5/1 ARM coming in at 3.15 percent, per Freddie Mac data.

    Since Freddie began tracking the five-year ARM back in 2005, the spread has been as small as 0.27% and as large as 1.30% in 2011.

    If the spread were only 0.25%, it d be hard to rationalize going with the uncertainty of the ARM. Conversely, if the spread were a full percentage point or higher, it d be pretty tempting to choose the ARM and save money for at least 60 months.

    Let s look at an example of the potential savings:

    Loan amount: $350,000

    30-year fixed monthly payment: $1,626.87

    5/1 ARM monthly payment: $1,504.08

    So you’d be looking at a difference in monthly mortgage payment of roughly $122, or $1,464 annually ($7,320 over 5 years), using our example from above. Not bad, right?

    You d also pay down your mortgage faster because more of each payment would go toward principal as opposed to interest. So you actually benefit twice. You pay less and your mortgage balance is smaller after five years.

    After five years, the outstanding balance would be $315,427.87 versus $312,017.26 on the five-year ARM. That s roughly another $3,400 in savings for a total benefit of nearly $11,000.

    Discussion over, the ARM wins! Right? Well, there’s just one little problem

    It might not always be this good. In fact, you might only save money for the first five years of your 30-year loan.

    After those initial five years are up, you could face an interest rate hike, meaning your 5/1 ARM could go from 3.25 percent to 4.50 percent or higher, depending on the associated margin and mortgage index.

    ARMs Are Cheap But Will Likely Head Higher

    Currently, mortgage indexes are super low, but they’re expected to rise in coming years as the economy gets back on track, which it will eventually.

    And you should always prepare for a higher interest rate adjustment if you’ve got an ARM. In fact, lenders typically qualify you at a higher rate to ensure you can make more expensive payments in the future should your ARM adjust higher.

    So that’s the big risk with the 5/1 ARM. If you don’t plan to sell or refinance before those first five years are up, the 30-year fixed may be the better choice.

    Although, if you sell or refinance within say seven or eight years, the 5/1 ARM could still make sense given the savings realized during the first five years. And most people either sell or refinance within 10 years.

    Just be sure you can actually handle a larger monthly mortgage payment should your rate adjust higher. And realize that refinancing won t always be an option you may not qualify, or rates may be too expensive to justify a refi. It s never a guarantee.

    If you actually plan to pay off your mortgage, an ARM could be a bad idea unless you seriously luck out with rate adjustments. Or you serially refinance and pay extra to shorten the amortization period. Otherwise, there s a good chance you ll pay a lot more than you would have had you gone with the 30-year fixed.

    Why? Because each time you refinance to another ARM, you re getting a brand new 30-year term. That means more interest is paid over a longer period of time, even if the rate is lower.

    However, if you’re a savvy investor and have a healthy risk-appetite, the 5/1 ARM could mean some serious savings, especially if the extra money is invested somewhere else with a better return for your money.

    Five years not enough for you? Check out the 30-year fixed vs. the 7-year ARM, which provides another two years of interest rate stability. The rate may not be as low, but you ll get a little more time before that first rate adjustment.