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Real Estate Tips
Financing Your Home >ARMs

Here is a tip for those who are shopping for Adjustable Rate Mortgages (ARMs): the "margin" is almost as important as the initial rate. The margin is the percentage point above the average yields for Treasury notes on which future rate adjustments will be calculated.

Let's compare two hypothetical one-year ARMs. The first may have an initial interest rate of 7% with a 2.5 margin, while the second begins at 6 7/8% with a 2.75 margin. Both loans have rate caps of 2%. Suppose that at the end of the first year of the loan, the average of the one-year Treasury note yield has been 5 1/2%. For each loan, the lenders will add the margin to that 5 1/2% average yield. Thus the interest rate for first loan would increase from 7% to 8%, and the second would go from 6 7/8% to 8 1/4%. While the first ARM had a slightly higher initial rate, it will have lower rates in subsequent years, unless the Treasury note rates increase enough to activate the annual caps on the amount of the increase. There is a wide variance among margins in ARMs offered by competing lenders, and this should be a factor when you decide on your loan.

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Real Estate Trivia
Q 
What place is known as "America's Stonehenge"?

A 
A 4,000 year-old stone constructed megalithic site located on Mystery Hill in Salem, Massachusetts.
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Jason L. Mehler, REALTOR®, real estate agent and broker for Rye, Rye Brook, Port Chester and Harrison, New York home listings, property and land for sale - NUMBER1EXPERT(tm)

Jason L. Mehler, Associate Broker
Better Homes and Gardens Rand Realty

29 Locust Avenue
Rye, New York. 10580
Phone: 914-943-6450
Email: JasonLMehler@NUMBER1EXPERT.com

I work to consistently exceed customer/client expectations! When buying or selling your home, choosing the right real estate professional is your first important decision. In such a competitive market, you need the expertise, success and company backing that will help you reach your ultimate goal. And you need a personality that offers courtesy, patience and the energy to help you through this process. I assist buyers and sellers of homes in Rye, Harrison, Rye Brook, Purchase & Port Chester, NY as well as other areas of Westchester County, New York.

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