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LEARN ABOUT ADJUSTABLE MORTGAGE RATE LOANS IN CA
Adjustable Rate Mortgage Loans in California
The type of loan that has monthly payments based on a 30-year repayment schedule and the interest rate remains fixed for the first few years. The interest rate (monthly payments) may change after that. This is called the “adjustment period.”
The new rate is based upon changes in a financial index and is calculated by adding a specified amount to the index. The amount that is added to the index is called the margin. Let’s say the index equals 4.5% at the time of adjustment and the margin equals 2.50%, the new interest rate would be 7%. However, adjustable loans usually have an adjustment cap. So if the adjustment cap is 2%, the new rate would be 6.5%.
There is also a lifetime cap that limits how much the rate can go up or down during the life of the home loan. These loans can work out well for people who stay in their house for the short term.
WHAT ARE THE BENEFITS OF AN ADJUSTABLE RATE MORTGAGE LOAN?
Adjustable-rate mortgages come with a set of unique advantages because the interest rate on the loan adjusts with interest rates in the current marketplace. With this being said mortgage payments can fluctuate with the current interest rate of the loan meaning they can fall or rise at any given time. When interest rates fall, so do your monthly payments and vise versa if they were to rise.
Adjustable-rate mortgage loans in CA oftentimes have much lower interest rates compared to a home loan such as a fixed-rate mortgage. Because the rates are much lower than other mortgage home loans it's likely you are able to pay more principal per month.
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Orange County Office
17155 Newhope St. Suite H
Fountain Valley, CA 92708