Salt Lake City, UT (PRWEB) March 6, 2007
Homeowners with Adjustable Rate Mortgages (ARMs) would be wise to review their loan documents in the coming months, especially if their loan is due for a rate reset in 2007, reports GuideToLenders.com, an online consumer resource for broker and lender information. In "Get Ready for a Major Adjustment: Looking into the Future of Adjustable Rate Mortgages for 2007," GuideToLenders.com columnist Gina Pogol provides a detailed analysis of the characteristics of adjustable rate mortgages, how rates are determined, how ARM loans are priced and marketed and an analysis of the mechanics of loans with negative amortization features (http://www.guidetolenders.com/calculators/Fix_Your_ARM.jsp.).
The financial indices that drive many ARM rates are predicted to rise in 2007, and the Financial Forecast Center predicts an increase in the one-year Treasury Securities yield of 0.35 percent to 5.3 percent by April 2007. In her article, Pogol states that most borrowers with loans resetting in 2007 will be making higher payments by the end of the year. How much higher depends on the financial index to which the loan is tied and the margin added to that index by the lender. For example, a hypothetical borrower with a one-year ARM carrying a 2 point margin could expect to pay 7.3 percent if its index rises as predicted to 5.3 percent. Those with negative amortization ARMs may face a triple threat of increasing rates, payments and loan balances as the teaser rates expire and the fully-indexed rates kick in.
The article presents an inside look at the different features of ARMs and how they affect pricing. Lenders are able to offer lower start rates, sometimes called "teaser" rates, because ARMs can be adjusted upward in the event of inflationary pressures, making them less risky for the lender and more risky for the borrower. ARM pricing is different than that of fixed rate mortgages as well, claims the author, because many of these loans are not cleared through Fannie Mae or Freddie Mac but are held by the lenders in their portfolios. The lender may price according to local market conditions or to defray risk in specific areas. Borrowers considering refinancing should shop around because different lenders may price differently in a given area.
Pogol's article (http://www.guidetolenders.com/calculators/Fix_Your_ARM.jsp.) is one of two in-depth analyses at GuideToLenders.com helping homeowners to evaluate their mortgage status in the first quarter of 2007.
GuideToLenders.com is a consumer resource featuring guides on how to find the right lender or broker to provide options to best suit consumers' needs. The site has a variety of free tools and tips and provides an easy way to find multiple lenders to help consumers with their lending needs. Products offered by the lenders/brokers include new home financing, refinancing, home equity line of credit, and debt consolidation loans. To find out more, visit http://www.GuideToLenders.com.