When meeting with your Nationwide Equities professional, they will review the four components of an ARM, which are: index, margin, interest rate cap structure, and initial interest rate period. After discussing your situation and possible options with one of our professionals, you can decide if an adjustable-rate mortgage is right for you! See below for some more features and benefits of an ARM.
Annual and lifetimes caps come stop interest rates from rising above a certain level during certain periods of time
If housing market rates fall, your interest rate can drop
This type allows the home buyer to select a term of fixed rates before it starts to adjust, which means a lower initial payment than a fixed-rate mortgage
Interest-only (I-O) ARM: Interest-only ARMs allow you to pay only the interest for a specified number of years, typically between 3 and 10 years. This arrange- ment allows you to have smaller monthly payments for a prescribed period. After that period, your monthly payment will increase— even if interest rates stay the same—because you must start paying back the principal and the interest each month. For some I-O loans, the interest rate adjusts during the I-O period as well.
Payment-option ARM: An ARM that allows the borrower to choose among several payment options each month. The options typically include (1) a traditional amortizing payment of principal and interest, (2) an interest-only payment, or (3) a minimum (or limited) payment that may be less than the amount of interest due that month. If the borrower chooses the minimum-payment option, the amount the loan.
Data is available through the Consumer Financial Protection Bureau at https://www.consumerfinance.gov/data-research/hmda/