Adjustable Rate Mortgages (ARM) from the California Mortgage Loan Company
As the index figure moves up or down, your interest rate will be adjusted accordingly. FHA insured ARMs use the Constant Maturity Treasury index (weekly average yield of U.S. Treasury securities, adjusted to a constant maturity of one year). Increases or decreases in the interest rate will be limited by the interest rate cap structure of your loan.
The interest rate cap structure provides some protection from large interest rate swings. There are two types of caps: (1) annual, and (2) life-of-the-loan. The annual cap restricts the amount your interest rate can change, up or down, in any given year, while the life-of-the-loan cap limits the maximum (and minimum) interest rate you can pay for as long as you have the mortgage. FHA offers a standard 1-year ARM and four "hybrid" ARM products. Hybrid ARMs offer an initial interest rate that is constant for the 1st 3, 5, 7 or 10 years. After the initial period, the interest rate will adjust annually. Below are the different interest rate cap structures for the various ARM products.
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