Rate ARM's in Colorado for home loans
Colorado adjustable rate loans (Colorado ARMs) have a low introductory
rate or start rate to help borrowers into getting a interest rate
and to give the colorado borrower a break as the first few months
of mortgage payments could be a burden since most first time borrowers
might still be paying rents somewhere, some times as much as 5.0%
below the current market rate of a fixed loan. This start rate
is usually good from 1 month to as long as 10 years. As a rule
the lower the start rate the shorter the time before the loan
makes its first adjustment.
in Colorado- The index of an ARM loan in Colorado is
the financial instrument that the loan is "tied" to, or adjusted
to. The most common indices here, or, indexes are the 1-Year Treasury
Security, LIBOR (London Interbank Offered Rate that is mentioned
on this site), Prime, 6-Month Certificate of Deposit (CD) and
the 11th District Cost of Funds (COFI also mentioned in this site).
Each of these indices move up or down based on conditions of the
financial markets. Please call one
of out local loan consultants to go over your loan scenario and
see what loan product is right for you here in Colorado.
Mortgage Rate Margin - The home loan margin is one of
the most important aspects of a ARM loan here in Colorado because
it is added to the index to determine the interest rate that you
pay. The margin added to the index is known as the fully indexed
rate. As an example if the current index value is 5.50% and your
loan has a margin of 2.5%, your fully indexed rate is 8.00%.Most
borrowers get confused when trying to make the difference between
rate and margin. Margins on loans range from 1.75% to 3.5% depending
on the index and the amount financed in relation to the property
Caps here in Colorado- All adjustable rate loans in Colorado
that we fund carry interim caps. Many Colorado ARM loans have
interest rate caps of six-months or a year. There are loans that
have interest rate caps of three years. Interest rate caps are
beneficial in rising interest rate markets, but can also keep
your interest rate higher than the fully indexed rate if rates
are falling rapidly. You should look at each CAP when funding
the colorado home loan and if you don't know anything about it,
you should have your loan consultant break down the process for
you as there should never be any surprises in a mortgage.
Payment Caps - Some Colorado home loans have payment
caps instead of interest rate caps. There is a big difference
between them so please read on. These mortgage loans reduce payment
shock in a rising interest rate market, but can also lead to deferred
interest or "negative amortization". These loans generally cap
your annual payment increases to 7.5% of the previous payment.
Its a good ideal not to get into a NEG AM situation but sometimes
borrowers are left with no choice, and NEG AM loans can be beneficial
but only really under certain circumstances. call
us today 855-529-5222 and we can go over the options with you.
Colorado Caps - Almost all ARMs have a maximum interest
rate or lifetime interest rate cap. The lifetime cap varies from
company to company and loan to loan. Loans with low lifetime caps
usually have higher margins, and the reverse is also true. Those
loans that carry low margins often have higher lifetime caps.