Adjustable Rate Mortgage Terminology -
Information
In this section, you will find answers to the most
frequent questions we receive about adjustable rate mortgage
terminology so that you can better understand adjustable rate
mortgages. If you have a question we do not address, please ask us
directly! Please check our Mortgage
Terms Glossary for commonly used mortgage terminology.
Components of Adjustable Rate Mortgages
To understand an adjustable rate mortgage, you
must have a working knowledge of its components. Those components are:
Index: A
financial indicator that rises and falls, based primarily on the
economy and changes in the marketplace. It is usually an indicator and
is therefore the basis of all future interest adjustments on the loan.
Mortgage lenders currently use a variety of indexes as you will find in
our Adjustable Rate
Mortgage Index section.
Margin:
The margin is added to the index to determine the final interest rate
when the loan has finished the fixed portion (1 to 10 years) and is in
the adjustment phase.
Initial Interest:
The rate during the initial period of the adjustable rate mortgage in
which the interest is fixed. This fixed period can range from 1 year to
10 years.
Note Rate:
The actual interest rate charged for a particular loan program.
Adjustment Period:
When the initial fixed period of 1 to 10 years has ended the loan then
enters the adjustment period where the loan will adjust on a scheduled
basis (typically once a year).
Interest Rate Caps:
Limit placed on the up-and-down movement of the interest rate,
specified per period adjustment and lifetime adjustment (e.g. a cap of
2 and 6 means 2% interest increase maximum per adjustment with a 6%
interest increase maximum over the life of the loan).
Negative
Amortization: Occurs when a payment less than the
interest due is made. The shortfall amount is added back onto the
principal balance.
Convertibility:
The option to change from an adjustable rate mortgage to a fixed-rate
loan. A conversion fee may be charged.
Homex Financial provides a wide range of
adjustable rate mortgages for your mortgage refinance and home purchase
needs. We can answer any questions you might have and can help you
determine whether an adjustable rate moorage is the best mortgage for
your needs.
More Adjustable Rate Rate Mortgage
information.
Adjustable
Rate Mortgage Indexes
Adjustable
Rate Mortgage Information
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