Posted on: 27th Apr, 2007 06:50 pm
2% interest for 3 years sounds to good to be true. Whats the catch. They say it\'s not a reversible mortgage.
Lmandets,
It must be a arm with the initial rate of 2%, check the margin which will be added to the rate after 2 yrs. and also the index that is been used.
It must be a arm with the initial rate of 2%, check the margin which will be added to the rate after 2 yrs. and also the index that is been used.
Welcome Lmandets,
Is it option ARM rate that you're talking about? The 2% rate is the introductory rate on most ARMs especially the option ARMs. Lenders prefer offering such a rate for an initial period of time, say from 1 to 3 so that low-income borrowers can qualify for an ARM which they would have been able to get otherwise.
Is it option ARM rate that you're talking about? The 2% rate is the introductory rate on most ARMs especially the option ARMs. Lenders prefer offering such a rate for an initial period of time, say from 1 to 3 so that low-income borrowers can qualify for an ARM which they would have been able to get otherwise.
"2% interest for 3 years sounds to good to be true. Whats the catch. They say it's not a reversible mortgage."
2% is the start rate or what is called the teaser rate. The main thing to know is the FIR or the fully indexed rate, which will be margin plus index value.
calvert
2% is the start rate or what is called the teaser rate. The main thing to know is the FIR or the fully indexed rate, which will be margin plus index value.
calvert
You need to know the initial interest rate period also called the introductory period which is commonly for 1 or 3 months, after which the interest rate would change. It could be a 1-month Option ARM or 3-month Option ARM of 15 or 30 yr. term and 2% is the initial interest rate/start rate.
The start rate will be used to calculate the minimum payment that you are required to make for first 3 yr's monthly payments. During the introductory period your monthly payment would be the minimum payment and the interest rate calculated will be the start rate.
After the introductory period (1 or 3 months) you are charged interest on your loan at FIR or fully indexed rate (which is margin + index value) and monthly payment can be interest only payments, fully amortizing 30 yr. payments, fully amortizing 15 yr. payments or the minimum payments. The minimum Payment amount remains the same even when the start rate is no longer in effect and interest is computed on your loan at the FIR.
If you only make minimum payment after end of introductory period, your loan may not amortize completely over the remaining term of your loan & result in negative amortization.
Miller
The start rate will be used to calculate the minimum payment that you are required to make for first 3 yr's monthly payments. During the introductory period your monthly payment would be the minimum payment and the interest rate calculated will be the start rate.
After the introductory period (1 or 3 months) you are charged interest on your loan at FIR or fully indexed rate (which is margin + index value) and monthly payment can be interest only payments, fully amortizing 30 yr. payments, fully amortizing 15 yr. payments or the minimum payments. The minimum Payment amount remains the same even when the start rate is no longer in effect and interest is computed on your loan at the FIR.
If you only make minimum payment after end of introductory period, your loan may not amortize completely over the remaining term of your loan & result in negative amortization.
Miller