ARM Loan

ARM loans, also known as Adjustable Rate Mortgage Loans, are becoming more and more popular today. An ARM loan is a mortgage that does not charge a fixed rate of interest. This financing will change periodically either up or down depending on how interest rates change. Most borrowers who aren't planning on owning the property for a long period of time should look into and consider this type of financing for their home purchase. For some buyers adjustable rate financing that offers lower interest rates can increase their purchasing power.

There are two main types of adjustable rate financing. An FHA ARM loan is for those borrowers who are in need of home affordability, easy qualification, payment security, speed in obtaining a loan and the special advantage of being able to refinance into a fixed rate loan if the need arrives. A second type, Option financing, gives the borrower more control over their mortgage payment and offers the borrower choices on payment options. A minimum payment option is when the payment is set for 12 months and payments can change annually within the limits of the payment cap. An Interest-only payment option defers paying the principal and the borrower only pays on the interest. The fully amortizing payment option is an ARM loan where payments are made on both principal and interest. The payment changes each month and is calculated based on the prior month's fully indexed rate, the balance and the remaining terms.

When researching any kind of financing, be sure to compare the features or key elements offered by the lender. To make a knowledgeable decision about arm loans the borrower needs to know the terms(15 or 30 years), the initial interest rate (usually varies from 1.23 to 3.95%), the margin (fixed rate determined by the lender and added to the index value to determine payment), the adjustment period (payments can change within months or years), the rate and payment caps (limit on how much the loan rate or payment can increase), the index (the gauge that measures interest rate levels), and the negative amortization (unpaid interest that gets added to the balance increasing the mortgage balance). Prior to signing for an ARM loan, the borrower should also check with the lender to see if there are any prepayment penalties and if they have the option of conversion to a fixed rate. Researching arm loans on the Internet allows the borrower a quick and easy way to learn all they can about the ARM loans available and to find the right lender for their situation. Biblically, Christians are called to be knowledgeable in all they do. "Be thou diligent to know the state of thy flocks, and look well to thy herds. For riches are not for ever: and doth the crown endure to every generation?" (Proverbs 27:23-24)