UNDERSTAND ADUSTABLE RATE MORTGAGE PRODUCTS
rate will be based on current fixed mortgage interest rates, however it will be about a half of one point (.50%) higher than market rates on that day. This is a very attractive feature on an ARM product.
SUMMARY There are many things to consider when shopping for an ARM. You need to understand the index that the product is tied to. You need to know the adjustment and life caps. You need to know the margin and negotiate this if possible. You want to understand the adjustment time frames and know for sure if your payment adjusts with each interest rate adjustment. Ask about a conversion option.
When deciding what ARM product is best suited for your financial needs, be upfront with your lender. That person will help you. Always ask if your lender has a history of the index that the product is tied to. This will show you the kind of changes the index makes. Make sure that you understand the product COMPLETELY. If you are hesitant at all, don't do it. ARMs can be great mortgage products if you pick the one that will work best for you. Get the facts and explore and understand all of your options.
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