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Dave Stambone
Vice President
HamiltonLadd Home Loans 203.240.9611 dave@davestambone.com

"Dave consistently offers my clients better rates than retail banks do.  For the last seven years, every client I have referred to Dave has been extremely satisfied."
 
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CT Business Services
 
 
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How an Adjustable Rate Mortgage Really Works!

 

Rates on ARM's are actually fixed for

a period of 1, 3, 5, 7, or 10 years

 

The rate is calculated on a 30 year amortization term.

It may adjust each year upon expiration of the fixed period you choose:

 

When considering an ARM be sure to understand:

  • Initial Rate
  • The Index (LIBOR, T-Bill, etc.)
  • The Margin
  • The Fully Indexed Rate
  • Caps  

IN THIS EXAMPLE WE WILL USE A 5/1 ARM:

 

Initial Rate = 2.75%  (Fixed for the first 5 years)

 

The rate will fully adjust after five years, here's how:

 

The Index (typically LIBOR - published in the wall street journal or online)  Currently at .60%.

This is the variable part & fluctuates w/ market.

 

+

 

The Margin (this is the fixed part of the fully indexed rate & is set forth by the lender you choose). 

For Example: 2.50%

 

=

 

The Fully Indexed Rate = 3.08%

(this means if the rate were to adjust today it would increase by .35%.)

 

Caps- ARMs are equipped with caps to protect you from major spikes with the Index.  For Ex: 5-2-5

No more than 5% over the margin the 1st year

No more than 2% over margin each additional year

No more than 5% over the margin over life of loan.

 

Major Benefits of an ARM:

  • Offers lower initial rates & payments
  • Maximizes buying power
  • Increases cash flow to invest elsewhere     
Program Spotlight:
FHA Loans with up to 2.50%
lender credit with
market rates!
  • Helps absorb most closing fees
  • Can be used towards lender & attorney fees, appraisal, escrows, taxes, insurance, & pre-paid interest
  • Great alternative to a seller's credit
  • Beneficial for first time home buyers
  • Available for purchase or refinance
  • Market rates with no points! 

Ex:  $350,000 Loan x 2.5%  = $8,750 credit!

 

Call and let us help with your mortgage needs today.
203.240.9611

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