Christian Arm Mortgage Loan
A Christian ARM mortgage loan can offer borrowers a flexible choice in home financing and open up the possibility of home ownership. There are, of course, drawbacks to this approach. The potential borrower should do careful research when considering this lending option. While significant savings can result, the possibility of significant expense exists as well. ARM stands for adjustable rate mortgage. The interest rates, and therefore the payments on these loans, can fluctuate depending on current trends. This is very different from standard fixed rate mortgages. With fixed rate loans, the interest remains the same during duration of the loan. The terms for an ARM mortgage loan can vary but usually involve interest rates that will remain fixed for a certain period of time, but then can change from time to time. These variations depend on what current rates dictate and on the terms of the loan. Such loans are believed to carry more financial risks than standard loans since rates can vary widely over a thirty year period. A benefit of the adjustable rate approach is that the beginning rate is generally some what lower than those assigned to thirty year fixed loans. Of course, that rate has the potential of rising significantly over the life of the loan, creating a good deal of extra expense to the lender.
The traditional wisdom is that anyone who is planning on carrying a mortgage for many years or even decades is better off going with fixed financing, while anyone who is only planning on carrying the loan for a short period of time is better off choosing the adjustable rate approach. The basics of how an ARM mortgage loan works can vary, but will generally have some major features in common. Those features could include the initial rate and payment, varying adjustment periods, the index, and the margin. The initial rates for most adjustable rate loans refer to a time period at the beginning of the loan's life during which both the interest rate and the monthly payment are low. This initial time period can range at anywhere from one month to five years or more. Adjustment periods refer to the cycle used to determine when the loan's rates with "adjust." A three year ARM, for example, would see rates and payments change every three years. The index and the margin are the two factors that determine the interest rate. The index measures the current rate trends and the margin refers to fees that a lender will add. All of these factors can make the payments on an ARM mortgage loan move up or down, depending on the terms established by the lender in the original loan agreement. Some loans will establish caps on the amount of interest that can be charged. The possibility of converting to a fixed rate mortgage is sometimes included in the original contract.
When considering an ARM mortgage loan, there are a few questions that the potential borrower should ask. Just how high could a monthly payment go? Is a borrower's income enough to cover the payment in any event, whether the payment goes higher or lower than expected? Will there be other debts in the foreseeable future that could make keeping up with mortgage payments difficult if not impossible? Does the borrower plan on living in the home for a long time or is the plan only to remain in the home for a short period of time and then sell it? What happens if the house does not sell? Does the borrower wish to make extra payments in order to reduce the principle or pay off the home early? What ever lending approach a borrower might choose, whether a fixed rate or an ARM mortgage loan, home ownership can be one of life's genuine blessings. The Bible talks about the importance of honoring God for all of the blessings that He bestows. "O clap your hands, all ye people; shout unto God with the voice of triumph." (Psalm 47:1)
Anyone who is considering an ARM mortgage loan should be aware of the potential drawbacks of this approach. A borrower could find themselves suddenly and unexpectedly facing vastly larger monthly payments if the initial discounted period ends at the same time that interest rates rise sharply. All lenders must offer caps on the amount of increase an interest rate experience. If a borrower is not alert and aware of all of the terms of their lending agreement, they could miss out on some money saving caps as well as paying thousands of dollars in extra interest. A borrower will find themselves in a difficult spot if rates climb to the point of creating a negative amortization situation. The term negative amortization simply means that the monthly payment will not cover the entire cost of the loan's interest. When this occurs, not only is there no money applied toward the principal, but any interest that goes unpaid is added back into the amount owed. In this situation, not only is the borrower not making any progress in paying off the principal, but is actually loosing ground.
A wise consumer will pay close attention to any caps on interest rates that are included in an ARM mortgage loan. Generally, two types of caps are available. A periodic cap will place a limit on the amount of increase in rates that can occur during only one adjustment period. The presence of periodic caps varies. Some loans offer no periodic caps at all. An overall cap is required by law and will set a limit on how high rates can climb throughout the loan's life.
Low Christian Adjustable Rate MortgagesLow adjustable rate mortgages (ARM) are a type of home loan which has an interest percentage that constantly changes with the current market, allowing borrowers to benefit when interest is decreasing. The more the borrower knows about these loans, the more likely they will be to aim for the low adjustable rate mortgage instead of a fixed percentage mortgage. The key to benefiting the most from an ARM is to choose shorter terms if possible. In seeking out ARMs, it's best to talk with God during the process. Such issues might seem silly to approach the Lord with, but He cares. "For it is sanctified by the word of God and prayer" (1 Timothy 4:5).
Lenders attract new borrowers, who are looking only at the interest percentage or a lengthy term to repay the low adjustable rate mortgage, with the possibility of low monthly payments. However, if the borrower would take a long-range view of their low adjustable rate mortgage, they would become aware that the lower payments associated with the longer term will cause them to pay more than they would with shorter term ARMs. Shorter terms may vary the interest more often, but their rates are lower over all because of the larger monthly payments.
Low ARMs are based on various economic indicators called "indexes". One month and six month low adjustable rate mortgages are most commonly based on the LIBOR index; the London InterBank Offered Rate. For three and six months, low ARMs, the Treasury Bills, are more commonly used. These indexes are constantly changing, but only affect the loan's interest at the term renewal of the loan's period. So if the loan is set for an ARM period of six months, the interest is the current percentage for the (for instance) Treasury Bill rate plus a margin, the mark-up determined by the lender and agreed to by the borrower in the contract.
The good news with a mortgage of this type is that it is required to have a cap, which limits the amount the interest rate may go up or down. When the index plus margin may exceed that cap, it is held in check and limited to the cap's maximum or minimum. This cap will most often also contain a clause for a lifetime cap as well. The low adjustable rate mortgage will then be near predictable for the borrower for the life of the loan and they can plan their budget accordingly. These caps give the borrower a security in accepting a variable percent with such volatile indexes. They are perhaps the lender's greatest risk in using low adjustable rate mortgages with volatile indexes.
An adjustable rate mortgage, or ARM, is a loan that has fluctuating payments. adjustable rate mortgages have interest rates that are connected to the economic index, that the federal government or LIBOR oversees. And, these rates are directly tied to the economy in the given countries. This type of financing is not for everyone, but some homebuyers will find that it suits their financial situation perfectly. The Internet can supply information about all types of loans and homebuyers can log on to educate themselves about the different loans on the mortgage markets today. Getting informed about an adjustable rate mortgage and knowing how to best handle it is strongly advised, before making that final commitment for your own home financing.
There are several types of adjustable rate mortgages to be considered among the various loans offered by mortgages today. Some have an adjustment in the index at every three months, and there is an adjustable rate mortgage that offers a three- year adjustment period. These adjustments, or fluctuations are directly associated with the rising and falling interest rates, but generally are lower than the current fixed rate. When fixed rates are high, adjustable mortgages can look very appealing, but only an educated borrower is equipped to evaluate both the advantages and the disadvantages..
Finding ample information about adjustable rate mortgages is easy with the amount of information on home loans located throughout the Internet. Anyone considering borrowing money should first understand how this type of loan works, and should then speak with a financial advisor about the pros and cons of an ARM loan. Initially, this type of financial help can be appealing, but again, following specific steps and suggested guidelines in payments is recommended. And, to get those guidelines, consumers need to become educated and seek advice.
If you are a Christian consumer who is looking for a lender to work with and looking for the right loan for your family's needs, then do go forward and consider an adjustable rate mortgage. However, once a decision about adjustable rate mortgages is made, it is a good idea to rest in the direction that you received from loved ones and trusted advisors. God is ultimately in control of all things, and if you have been faithful to pray and put Him first, then you should be able to operate in the surety that He is watching over you and your situation. "If ye then be risen with Christ, seek those things which are above, where Christ sitteth on the right hand of God. Set your affection on things above, not on things on the earth." (Colossians 3:1-2)