Indexed ARMs
Adjustable rate mortgages on which the interest rate is mechanically determined based on the value of an interest rate index. Indexed ARMs are distinguished from Discretionary ARMs, in that the first provides the lender with zero discretion in setting future interest rates, while the latter provides the lender with complete discretion. All ARMs discussed in Adjustable Rate Mortgage (ARM) are indexed ARMs, which is the only kind used in the U.S.
Popular Mortgage Terms
The interest rate adjusted for intra-year compounding. Because interest on a mortgage is calculated monthly, a 6% mortgage actually has a rate of .5% per month. If there were no principal ...
The house in which the borrower will live most of the time, as distinct from a second home or an investor property that will be rented. ...
A borrower who submits applications through two loan providers, usually mortgage brokers, without their knowledge. Home purchasers sometimes submit more than one loan application as a way ...
The period you must retain a mortgage in order for it to be profitable to pay points to reduce the rate. ...
The highest rate possible under an ARM contract; same as 'lifetime cap.' It is often expressed as a specified number of percentage points above the initial interest rate. ...
The upfront and/or periodic charges that the borrower pays for mortgage insurance. There are different mortgage insurance plans with differing combinations of monthly, annual, and upfront ...
A reverse mortgage program administered by FHA. ...
The lowest interest rate possible under an ARM contract. Floors are less common than ceilings. ...
A clause in the note that allows the lender to demand repayment of the balance in full. A demand clause is even better (for the lender) than an acceleration clause. An acceleration clause ...
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