However, given that the gap between ARM start rates and fixed rate loans is usually much greater, ARMs remain unattractive for most borrowers at this time. The new Senate leadership in Washington may impact loan rates. Compromise, not making waves, should make investors happy, something which should be good for interest rates. Because a larger loan amount is outstanding, lenders have more risk and so interest rates are somewhat higher than for conventional financing. Because the interest rate changes, monthly payments can also rise or fall.
Most ARMs have annual and lifetime interest caps, and also annual and lifetime monthly payment caps.
Interest rates are calculated at a given percentage of the loan amount per year, say 7 percent annually. Thus if a loan interest rate moves from 6.60 percent to 6.65 percent, it has gone up .05 percent or 5 basis points. Be aware that the rates presented here may not reflect the rates for individual loan products at any given time, and that rates are constantly in flux. Written by Realty Times Staff Click here for a printer-friendly version of this article. Click here to translate this page to another language.