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Margins on ARM Loans – What are they?

John Thomas August 12, 2007 Tags: , , ,
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Margins on ARM Loans – What are They?

Margins on an Adjustable Rate Mortgage loan is the amount a lender adds to the index in order to determine the mortgage interest rate at each adjustment period on the loan.  The margin is assigned by the mortgage lender at the time the ARM loan is originated. It cannot be changed once the mortgage loan closes as it is set for the life of the loan.  Call 302-703-0727 to apply for an ARM Loan or for more information.  APPLY ONLINE

Margins on ARM Loans – Example

Margin example, if the index of the ARM loan is at 5.0%, and the margin was set at 1.5% when the loan was originated, then the fully indexed rate is 6.5%. The margin is fixed for the life of the loan so if the next adjustment period the index is 4.5% then the Fully Index Rate will drop to 6.0% and the monthly payment would be reduced as well.

How long it takes for an adjustable rate mortgage to adjust for the first time is set when the loan is originated and is verified by the name of the loan such as a 5-1 ARM.  The 5 means the interest rate is fixed for the first 5 years at the teaser rate then it will adjust based on the margin and the index.  The 1 means the ARM loan will adjust every year until the end of the term based on the margin and the index.

The index for the adjustable rate mortgage is also selected by the mortgage lender when the type of ARM is selected at origination.  The most popular indexes for ARM Loans are the Libor Index and the MTA Index.

Apply for an Adjustable Rate Mortgage:

If you would like more information on Margins or Adjustable Rate Mortgages or would like a free analysis on an ARM Loan versus a Fixed Rate Loan for the purchase of a new home or the refinance of your existing mortgage, please feel free to call the John Thomas Team at 302-703-0727 or APPLY ONLINE HERE.

John R. Thomas – NMLS 38783

Certified Mortgage Planner – Primary Residential Mortgage, Inc.

302-703-0727 DE Office / 610-906-3109 PA Office / 410-412-3319 MD Office

248 E Chestnut Hill Rd, Newark, DE 19713

About John Thomas

John Thomas and his team are long-time Delaware natives. They know the local real estate market as well as they know the loan products that help them serve it. Dedicated to helping first-time buyers; the John Thomas Team are experts on first-time buyer loan programs (FHA, VA, USDA) and conduct monthly first-time buyer seminars that have been attended by more than 3000 Delaware buyers.