Home Equity Central Mortgages
Home Equity
Central offers two main types of Mortgages, an Adjustable Rate Mortgage
and a Fixed Rate Mortgage.
Adjustable Rate Mortgages
Adjustable Rate Mortgages, commonly referred to as ARMs, are mortgages
with interest rates that can change periodically according to the economic
index selected when the mortgage is issued. With this form of mortgage,
the initial interest rate is lower than a fixed-rate mortgage, but the
monthly payment can rise and fall along with the economy. When you choose
an ARM, you exchange the possibility of lower interest rates for the risk
of a possible rate increase.
ARMS have
their fair share of benefits:
- The initial interest rate on an ARM is frequently 2-3 points lower than a fixed-rate mortgage.
- This lower initial interest rate makes qualifying easier for larger loans.
- The initial interest rate on an ARM is frequently 2-3 points below that of a fixed-rate, meaning you may qualify for a larger loan with an ARM mortgage, which means you can probably purchase a more expensive home.
- An ARM may save you money if you plan to move within a few years and are not concerned about the long-term possibility of rate and payment increases.
- You may consider the risks involved in an ARM if you expect your income to increase enough to cover potential increases in payments, or if you expect rates to fall.
When your interest rate is due to be adjusted, a previously determined percentage called the margin is added to the current rate of the index to which your loan is tied. This determines the new rate. The frequency and dates of adjustments are established when you apply for your loan. ARM interest rates and monthly payments may change monthly, every six months, once a year, or every three, five, or seven years, depending on the terms of your loan and the activities of the market.
"Caps"
limit the amount by which the interest rate can increase at each adjustment,
thereby protecting you from drastic changes in interest rates. The Life
Cap is the maximum amount the interest rate can rise over the life of
your loan - the highest it can ever go, regardless of the fluctuations
in the market. If you have a typical one-year ARM, your loan may have
a lifetime rate cap of 6%. If you have an initial interest rate of 4%,
the highest you would ever pay would be 10%. The second cap to consider
is the Annual Cap, which may top out at 2%. This means your interest rate
can never increase by more than 2% in any one year.
Home Equity
Central currently maintains over 13 local offices throughout the country
and we originate loans in Alabama, Delaware, Idaho, Iowa, Missouri, Oklahoma,
Nebraska, New Mexico, North Dakota, Mississipi, South Dakota, Texas, Virginia,
West Virginia and Wyoming.
If you live in any of the 50 states we do not cover, please see our partner,
Premier Equity, by clicking here.
Read
on about Fixed Rate Mortgages here.
We invite you to contact us today!
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