Can points lower the rate for the whole term of the ARM?

Guest

if I pay points for getting the interest rate reduced, will this reduction continue for whole term of an arm.

Guest

Hi Nevis,

If you pay points for the reduction in the rate, say 1 point which will be 1 percent of the loan, then the reduction will be applicable for the starting rate. Suppose the starting rate is for the first 3 years, then the reduction in rate will apply for these number of years only.

Glen Baxter

sara · Posted: Mon Oct 30, 2006 8:26 pm Post subject: RE: Rate reduction for ARM

Hi Nevis,

By paying points, the initial rate on an ARM can be reduced. As such, the reduction will continue for the time period for which the intial rate is applied.

Know more on how points affect interest rate on a home loan.

Thanks,

Sara.

Caron · Posted: Mon Oct 30, 2006 8:54 pm Post subject: RE: Discounted ARM

Hi Nevis,

If you pay points on an adjustable rate mortgage, then your initial monthly payments may be low but this will not remain the same for the entire loan period. This is because the interest rate on an ARM varies at regular intervals of time.

Lenders generally offer such discounted rates so that he can decide whether he should approve your loan on the basis of your ability to afford the payments. But you should be careful as to whether it will be possible for you to make payments in the later years when the discount will expire and the rate will be adjusted.

Thanks,

Caron.

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