Here is a tip for those who are shopping for Adjustable Rate Mortgages (ARMs): the "margin" is almost as important as the initial rate. The margin is the percentage point above the average yields for Treasury notes on which future rate adjustments will be calculated.

Let's compare two hypothetical one-year ARMs. The first may have an initial interest rate of 7% with a 2.5 margin, while the second begins at 6 7/8% with a 2.75 margin. Both loans have rate caps of 2%. Suppose that at the end of the first year of the loan, the average of the one-year Treasury note yield has been 5 1/2%. For each loan, the lenders will add the margin to that 5 1/2% average yield. Thus the interest rate for first loan would increase from 7% to 8%, and the second would go from 6 7/8% to 8 1/4%. While the first ARM had a slightly higher initial rate, it will have lower rates in subsequent years, unless the Treasury note rates increase enough to activate the annual caps on the amount of the increase. There is a wide variance among margins in ARMs offered by competing lenders, and this should be a factor when you decide on your loan.

	See All Tips In The "Financing Your Home" Category >
	See Complete Library Of Hundreds Of Tips In 30+ Categories >

Gina Odom
Magnolia Properties
902 Reilly Rd
Fayetteville, NC 28314
910-584-7705
Fax: 910-487-0167
ginaodom@NUMBER1EXPERT.com

I bring total dedication to providing exemplary service-qualities which bring me constant repeat and referral clients. I am committed to becoming your Real Estate Resource for Life. Gina Odom

www.GinaOdom.net is brought to you by Gina Odom
NUMBER1EXPERT in real estate for Fort Bragg, Fayetteville and Hoke, North Carolina

Read Gina Odom's Privacy Guarantee, Terms of Service, and Free & Without Obligation Pledge