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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.
Do These Real Estate Tips Really Apply to YOU? We've learned these tips through experience. But we know that YOUR situation might be different. That's why we're here. It's our job to personally advise homebuyers and sellers. Ask us if any tip that we've included here really applies to your situation. Do any of these tips raise questions for you? Didn't find what you're looking for? Let us know! We are happy to answer ANY questions. It's our job! There's no obligation, and we promise to get back to you quickly...
| Q |
What private residence is considered the most expensive house ever built?
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| A |
The William Randolph Hearst Ranch in San Simeon, California cost over $30 million, equivalent today to $276,883,320. Bill Gates recently built a home for over $40 million.
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 See More Real Estate Trivia > |
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