When deciding on a loan program, one of the first questions is always, “What loan program is right for me?” Here at USAVA Lending, we make sure our clients are always informed on their mortgage options and what may work best for their situation. An informed decision about your mortgage options will ensure that your journey as a homeowner is as carefree and painless as possible.
An Adjustable Rate Mortgage (ARM) is a loan that starts out with a low introductory rate. However, the interest rate will change over time. For example, a 30 year ARM may have a set rate for the first 3 years, but the rate will then fluctuate over the next 27 years.
In contrast, a 30 year fixed rate mortgage will maintain the same interest rate for the duration of the loan. USAVA chooses to offer solely fixed rate mortgages. This ensures the stability and predictability of the payment, which stays the same regardless of market changes.
If you choose to purchase or refinance a home through the VA, you will have many options on Fixed Rate Mortgages ranging in length from 15-30 years.
An ARM has four major components: the index, the margin, interest rate cap structure, and the initial interest rate period.
• Index: The index is an economic indicator that establishes the base percentage rate on your ARM. There are many types of indices on the market. These indices are published daily in newspapers or on the Internet.
• Margin: A set percentage added on by the lender, which is disclosed in your loan contract. The index and margin are added together to determine the fully indexed rate.
• Cap structure: This provides some control over how much your interest rate can go up or down. Cap structure sets a “cap” on interest rate adjustments.
• Initial Interest Rate Period: This is usually an attractive low introductory rate, which expires within a set period of time.
ARMs often seems good at first, but then become costly and unpredictable after the initial interest rate expires. If you are currently in an ARM, it may be time to think about refinancing with USAVA Lending.
When It is Time to Refinance
• Are you finding it difficult to cope with the payment fluctuation?
• Would you have trouble making the payment if rates go up?
• Are you looking for something with more stability?
If you answered yes to any of these questions, it is time to speak with one of our government loan advisors about a fixed rate mortgage today.
Please call 888-842-0490 for more information on taking advantage of your VA Benefits.