Adjustable Rate Mortgages
At Gold Financial Services, we can help you finance your home through an adjustable-rate mortgage, also referred to as an ARM. An Adjustable Rate Mortgage is a type of mortgage offered to borrowers where interest rates fluctuate based upon market indexes. A base loan rate is fairly common when it comes to home mortgages; typically these have caps on charges and fees because they are regulated by the federal government. The amount a borrower must pay and the terms for the borrower may also change over the life of the mortgage.
To keep profits steady, lenders adjust rates based on common indexes such as the one-year London Interbank Offered Rate (LIBOR), Constant Maturity Treasury (CMT), Cost of Funds Index (COFI), Bank Bill Swap Rate (BBSW), and some lenders use their own indexes based on their product rates.
With these types of home loans for properties in San Antonio, not only are lenders able to pass the risk of changing interest rates over to their customers, but there are also times when ARM mortgages are favorable to the home buyer. One benefit for borrowers is that during times when the home loan market is unpredictable, or when fixed rate loan products are harder to acquire. Also, in the case where interest rates drop, this is a benefit to the borrower; however, if interest rates rise, this will affect the home owner when their monthly mortgage payments rise accordingly.
When interest rates rise in the US, lenders offer adjustable rate mortgages to protect themselves from the risk of the borrower’s repayment being compromised due to high interest rates. There are some protections offered to the borrower by the Consumer Federation of America, in which case, loans are categorized as predatory loans — where the borrower is given a home loan even though they may have trouble repaying their fluctuating mortgage payment. Protections against interest rate rises include a “cap” to which interest rates can rise during the full term of an ARM; this has to be delineated in the mortgage documentation. In some cases there is also a grace period, where a fixed rate is applicable for a period of time, in order to assist the borrower to find adequate means to raise their income to meet the rise in their mortgage payment. There is also a limit on the amount the interest rates may rise in a given year.
At Gold Financial Services, we can help you avoid confusion since there are so many home loan options available out there. All home loans can come across as complicated, detailed and very time consuming. Rest assured, Gold Financial Services is here to answer all of your questions and help ease some of the frustrations of understanding all of the application requirements and terms to help you get into the home of your dreams without the headache. We are here to help you find the best option, a home loan product that best meet your needs. Some other resources you may want to use as a guideline when putting together a checklist for your home buying venture, can be found at the Federal Reserve Board and the Federal Home Loan Bank Board.
Gold Financial’s Home Loan Specialists are just a phone call away at 210-802-4665 or use our convenient online tools to get started.