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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 is the most populous state in the United States?

A 
California, with 35.9 million people.
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Fawn Brents, REALTORŪ, real estate agent and broker for Lee's Summit, Raymore and Kansas City, Missouri home listings, property and land for sale - NUMBER1EXPERT

Kansas City Real Estate, Inc.
E-mail - infokansascityrealestate@gmail.com

14 SW 3rd St.
Lee's Summit, Missouri 64063
Office: 816.246.7700
FAX: 816.246.7701
Fawn Brents: 816.728.8688
John Brents: 816.830.9919
Jennifer Brents Dove: 816.260.8884

At Kansas City Real Estate, Inc., we know Kansas City! You can rely on our expertise and market knowledge to navigate you through the sale or purchase of a home. If you are a Seller, our proven marketing plan can help you sell your home in record time. And if you are a Buyer, all of our agents are can assist you in finding the Kansas City community that fits your lifestyle. Call...stop in...e-mail us today!

Fawn Brents, CIPS, ABR, SFR, GRI, CRS,CSP, e-PRO
fawn@kansascityrealestate.com
816.728.8688

John Brents, GRI
john@kansascityrealestate.com
816.830.9919

Jennifer Dove
jennifer@kansascityrealestate.com
816.260.8884,

Janet Wehmeir
janet@kansascityrealestate.com
816.718.7100

Keith Wehmeir
keith@kansascityrealestate.com
816.506.0000

Larena King
larena@kansascityrealestate.com
816.550.6987

REALTOR


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