Don't Go Shopping for a New Home Before You Know Exactly How Much You Can Spend! 

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 >

Ellen Seifts
Prudential CT Realty
Phone: 860-676-3909
Fax: 860-674-0033
Email: ellenseifts@NUMBER1EXPERT.com

Ellen Seifts is the NUMBER ONE AGENT in the Farmington Valley (Avon, Simsbury, Farmington, Canton, Burlington) and West Hartford, also consistently in the top five in the entire state of Connecticut and top 1% Nationally! With over nineteen years of experience, she has an outstanding track record with "Excellent" reviews from transactions and generous assistance above and beyond the norm! Ellen has won numerous awards year after year not only for Top Producer, but also for Customer Service. Her quality of service is proven out by the fact that clients stay with Ellen year after year, and look for her asistance in relocating a second time and in some cases a third time! You too, can join her long list of satisfied clients!Prudential Connecticut Realty is an independently owned and operated member of The Prudential Real Estate Affiliates Inc., and Prudential is a service mark of The Prudential Insurance Company of America.

www.ellenseifts.com is brought to you by Ellen Seifts
NUMBER1EXPERT™ in real estate for Avon, Farmington, Simsbury and Canton, Connecticut (The Farmington Valley), Connecticut

Read Ellen Seifts' Privacy Guarantee, Terms of Service, and Free & Without Obligation Pledge