Introductory Rate ARM's in Colorado for home loans

Most Colorado adjustable rate loans (Colorado ARMs) have a low introductory rate or start rate to help borrowers into getting a interest rate and to give the colorado borrower a break as the first few months of mortgage payments could be a burden since most first time borrowers might still be paying rents somewhere, some times as much as 5.0% below the current market rate of a fixed loan. This start rate is usually good from 1 month to as long as 10 years. As a rule the lower the start rate the shorter the time before the loan makes its first adjustment.

Index in Colorado- The index of an ARM loan in Colorado is the financial instrument that the loan is "tied" to, or adjusted to. The most common indices here, or, indexes are the 1-Year Treasury Security, LIBOR (London Interbank Offered Rate that is mentioned on this site), Prime, 6-Month Certificate of Deposit (CD) and the 11th District Cost of Funds (COFI also mentioned in this site). Each of these indices move up or down based on conditions of the financial markets. Please call one of out local loan consultants to go over your loan scenario and see what loan product is right for you here in Colorado.

Colorado Mortgage Rate Margin - The home loan margin is one of the most important aspects of a ARM loan here in Colorado because it is added to the index to determine the interest rate that you pay. The margin added to the index is known as the fully indexed rate. As an example if the current index value is 5.50% and your loan has a margin of 2.5%, your fully indexed rate is 8.00%.Most borrowers get confused when trying to make the difference between rate and margin. Margins on loans range from 1.75% to 3.5% depending on the index and the amount financed in relation to the property value.

Interim Caps here in Colorado- All adjustable rate loans in Colorado that we fund carry interim caps. Many Colorado ARM loans have interest rate caps of six-months or a year. There are loans that have interest rate caps of three years. Interest rate caps are beneficial in rising interest rate markets, but can also keep your interest rate higher than the fully indexed rate if rates are falling rapidly. You should look at each CAP when funding the colorado home loan and if you don't know anything about it, you should have your loan consultant break down the process for you as there should never be any surprises in a mortgage.

Colorado Payment Caps - Some Colorado home loans have payment caps instead of interest rate caps. There is a big difference between them so please read on. These mortgage loans reduce payment shock in a rising interest rate market, but can also lead to deferred interest or "negative amortization". These loans generally cap your annual payment increases to 7.5% of the previous payment. Its a good ideal not to get into a NEG AM situation but sometimes borrowers are left with no choice, and NEG AM loans can be beneficial but only really under certain circumstances. call us today 858-234-9116 and we can go over the options with you.

Lifetime Colorado Caps - Almost all ARMs have a maximum interest rate or lifetime interest rate cap. The lifetime cap varies from company to company and loan to loan. Loans with low lifetime caps usually have higher margins, and the reverse is also true. Those loans that carry low margins often have higher lifetime caps.