ARMS Revisited

First off, I’m not going to dwell on Freddie and Fannie and whatever problems they have as these 2 companies are simply too important to let fail. If they were allowed to fail the current slowdown in housing would pale by comparison.
Instead let’s look at adjustable rate mortgages- ARM for short. A few months ago, I wrote that the Federal Reserve wasn’t driving down interest rates to help the consumer, but rather save the banks and the consumer was merely a collateral beneficiary. If you have an ARM for your mortgage, or you are currently in a 3, 5 or 7 year fixed that is soon going to revert to an ARM, you may now reap the benefits. Albeit this is a false sense of security, and I would immediately start looking at refinancing into a fixed rate; but you may have a few months to act rather than weeks before the Fed starts raising rates again.
In order to determine what interest rate your loan is going to adjust to, refer to the copy of the mortgage note you received when you closed the current loan on your home. In that note, you will find an INDEX. This index may be the 1-year Treasury, LIBOR, Cost of Funds Index or 1 year MTA. Also in the note you will see a MARGIN. That margin may range from 2.25% to over 4% (This is what separates a good ARM from a bad one). To get the interest rate the loan will adjust to, look up what the current index is and add the margin to it- it is that simple. You can easily find the current index in the weekend papers or online or give me a call as I check them daily. There are sometimes caps on how far an ARM may move each adjustment, which will be in your note also.
Now the good news, the Federal Reserve has driven these indexes down to near historic lows from the mid 2% range to the mid 3% range. Call me if you have any questions and I’ll be happy to help.

Fixed Interest Rates for Conforming Loans (under $417,000) as of 7/24/08 (a.m.) are:
Rates quoted are for 0 point loans, for 2 points subtract about a half point in rate.
30 year fixed: 6.5% (APR 6.57%) payments are $2,635.72/mo.
15 year fixed: 6.125% (APR 6.242%) payments are $3,547.11/mo.