7/1 ARM can give a short-term boost to your finances
By: Ask Bill
Submitted: 2010-12-13 04:15:51 | Word Count: 559
I won't be surprised if this spring's housing market becomes one of the hottest ever. Mortgage loan rates are still very low, making it a good time to buy a home (or refinance an older mortgage loan). Also, many people thinking about buying or refinancing may be spurred to action because they don't want to miss the boat--they know the Federal Reserve is working hard to push rates up, and is sure to succeed sooner or later. A 7/1 ARM (adjustable-rate mortgage) has an initial interest rate that remains in effect for seven years, after which time the rate is adjusted once annually. The "7" of "7/1" refers to the number of years that the initial rate will apply; the "1" refers to the time interval between subsequent rate adjustments. With a 7/1 ARM, your rate will be fixed for the first seven years and then may adjust according to the ARM's margin, caps, and the index which the program is based upon. Sounds confusing? It does not have to be. A qualified mortgage professional can walk you through how 7 year ARMs work and he or she can provide you with an Adjustable Rate Mortgage Handbook which explains the ins and outs of these loans. In other words 7/ 1 arm is the type of loan that may re--adjust to the market every single year after the seven year introduction.
7 year mortgages can be a great alternative for home loan shoppers who do not need the long term financing of a fixed rate mortgage and who do not want to carry the risk of shorter term ARM products. 7 year mortgage rates are usually slightly lower than those of a 30 year fixed rate mortgage but, from time to time, may actually be higher. You can find out about the 7 year ARM rates by calling the various lenders, brokers, and banks. Many will offer 7 year arm mortgage products to choose from. If you are the type of person that is often looking for career advancement and could conceivably move within several years, an adjustable rate mortgage can be an ideal choice. These loans offer you a lower rate over a time period that is more in sync with the amount of time you will have the loan. 7 Year ARM Program Highlights are:
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-Low fixed rate for seven years
-Loan sizes can be up to $417,000 (jumbo loan sizes $417,000-$3,000,000 may also be available)
-Many have lifetime cap of 5% above initial rate
-Available for primary residences, second homes, and possibly for investment properties.
Mortgage loan is in essence debt paid out exclusively to allow someone to buy a home. So, if you are planning to buy a home, you can apply for mortgage loans to banks, financial institutions, private lenders, or specialized mortgage brokers. There are different kinds of mortgage loans available, at different rates. And, you must try and find the best rates and programs, by searching through a huge number of lenders. The right decision could mean saving thousands of dollars on mortgage payments every year. What's really important is to become aware of the many different mortgage loans options you have, and gathering detailed information about the ones that interest you the most. And a good real estate broker can help you at this.
