subject: Finance Your Miami Luxury Condos With An Arm Minus The Leg [print this page] Fixed mortgages are quite self-explanatory and easier to understand especially for first-time homebuyers. But if you're applying for an ARM to finance your Miami luxury condo purchase, it takes more than the basic knowledge of rates either going up and down to help you grasp the core concept of the mortgage option. You need to know the intricacies of the mortgage plan, including the risks that can possibly cause you to fall in a hole of financial woes in the future.
Initial Adjustment and Regular Adjustment Periods
First, you need to know the initial adjustment period for the loan you plan to apply for the financing of your Miami luxury condo. The initial adjustment period basically limits how much your interest rate can change at the first adjustment period.
If the initial adjustment period can provide you with enough time to prepare yourself before the interest rate of your Miami luxury condo mortgage resets or goes up, the regular adjustment period dictates the frequency of the changes or adjustments in your interest rate.
First, Regular, Lifetime Adjustment Cap
The first adjustment cap is the limit or maximum amount that your interest rate can adjust to for the first time. The interest rate can adjust often and the regular adjustment cap states the amount that it can change to during each adjustment. The lifetime cap, on the other hand, is the percentage increase limit of your interest rate during the entire life of the loan, or loan term.
Margin
Dont be surprised if the lender adds a margin to your loan; lenders do this generally to make money. What this means is that the interest rate of your Adjustable Rate Mortgage will include the interest rate plus the margin. When applying for the mortgage, dont forget to ask your lender how they arrive at the interest rate. There are several sources that brokers and lenders use to determine the margin, though its commonly around 2.5 to 3 percent.
ARMs are great if you're planning to stay at the property for more than 10 or so years. But if not, consider taking a hybrid mortgage, instead. Hybrid mortgages are great if you plan to stay at the Miami luxury condo for less than 10 years because they start out as fixed-rate and eventually turn to adjustable-rate. You will save a lot of time and effort if youve already asked several lenders if they offer this type of mortgage option. Choose wisely.
