An adjustable rate mortgage (ARM) is one of the most popular options available for both home mortgages and re-financing. Many homeowners do not fully understand the concept of an ARM and as a result may be somewhat hesitant to pursue this type of a mortgage. This is a shame because there are some situations in which an ARM or a hybrid mortgage can be the best mortgage solution for a homeowner who is in the process of re-financing. This article will focus on explaining the concept of an ARM, explaining situations where it is the best solution, debunking the most popular misconception regarding ARMs and explaining how those with bad credit can benefit from an ARM. At the conclusion of this article the reader should have a better understanding of ARMs and should be inspired to investigate this re-financing option further.
What is an ARM?
An ARM is an acronym for an adjustable rate mortgage. This means the interest rate associated with the mortgage is not fixed. Instead it is tied to an index such as the prime index and may rise and drop as the associated index rises and drops. The fact that interest rate is variable scares away many homeowners from considering this option further. However, there are certain safety measures in place which protect the homeowner from rapid increases. This safety measure will be discussed in greater detail later in the article on the section on the biggest myth regarding an ARM. However, for now homeowners should simply be aware that they would not be subjected to incredibly high interest jumps during a short period of time.
The Biggest ARM Myth
The variability of the interest rate in an ARM makes many homeowners feel very apprehensive. These homeowners envision interest rates going through the room during their loan term and resulting in their monthly payments skyrocketing. However, fortunately for these homeowners, rapidly increasing interest rates may not have a significant effect on ARMs.
This is because most ARMs have a built in clause which prevents the interest rate from rising more than a certain amount during a specific time period. During this time the national interest rate may rise significantly more but there is a cap on the amount the homeowner’s interest rate will be raised.
When is an ARM Desirable?
One of the most desirable situations for an ARM is as a part of a hybrid mortgage. Hybrid mortgages typically have one component which is fixed and one component which is adjustable. These types of mortgages may have a fixed rate for a set number of years begin to vary after this initial period. Alternately a hybrid loan may be variable for a number of years and then become fixed after this initial period.
The loan which begins with a fixed rate is usually desirable because the introductory rate is typically lower than the rate offered on traditional fixed loans for homeowners with comparable credit ratings. Homeowners may particularly like this option if they are repaying a smaller second mortgage and may be able to repay the loan in full before the introductory period ends.
ARMs for Those with Bad Credit
ARMs can also be very helpful for assisting those with bad credit in purchasing a home for the first time. There are a variety of loan options available today which makes it possible for even homeowners with poor credit to obtain a home loan. However, those with bad credit are usually offered these loans with unfavorable terms such as higher interest rates. Additionally, lenders may only be able to offer those with poor credit an ARM. Lenders take a significantly greater risk when they lend money to a homeowner with bad credit. As a result the lenders usually compensate for this increased risk by shackling the homeowner with less favorable such as a mortgage with an adjustable rate as opposed to a fixed rate.
To lease, you have two possible choices: either lease through a dealer’s
finance source or through an independent lease company.
A conventional dealer has a captive finance source, which can be the car
manufacturer’s financial company, such as BMW Financial Services, Honda
Motor Credit or General Motors Acceptance Corporation (GMAC), or a major
national bank such as Chase Manhattan.
Independent lease companies are no financial obligation to any single
one manufacturer financing source, but work with dealers anywhere in the
country.
So which one is better?
Conventional dealers provide better lease-deals on limited-time promotions.
Factory-subsidized cars that have subvented money factors and residuals are
very attractive lease deals and can be very hard to beat anywhere else.
Independent lease companies can offer you unbiased and professional advice
on vehicle selection regardless of make and model. This is because they are
not tied to a single manufacturer or financing source, unlike conventional
dealers who have to sell specific models. They can also be more flexible
regarding negotiating lease terms like residual value and mileage.
Ultimately, if you prefer a more personal and customer-oriented
relationship with your leasing agent, then you will do well with an
independent leasing company.
With so many options on the market when it comes to auto navigation systems how do you choose the one that will best suit your needs? This question may seem very simplistic; unfortunately the answer is not nearly as simple as the question. There are many things to consider when selecting a personal navigation system not the least of which is what purpose you will be using the system to achieve.
Many people consider auto navigation systems for their automobiles and no other purpose. The truth is that these devices can have many very practical uses in your every day life. If you are a person who spends a lot of time outdoors, you might find that a handheld GPS device with mapping capabilities is better suited to your personality and your needs than a stand-alone type of auto navigation system. The reason being that these devices can not only be used for turn-by-turn driving directions but also for off road travels, geocaching, boating, hiking, biking, and mountain climbing among many other popular activities. Handheld devices are perfect because they can be easily removed from your vehicle and taken along with you. The portability makes them perfect companions for just about any activity in which you choose to participate.
Many newer models of cars, trucks, and SUVs are coming equipped with in dash auto navigation systems. Don’t for a second think you aren’t paying for these glorious goodies. In fact, the chances are that you are paying quite the premium price for these lovely features and aren’t even aware. The worst thing though is that if you are financing the cost of your car you are also financing the cost of your navigation system. If at all possible avoid getting into this situation unless you are particular enamored of the look of the in dash systems as they really offer no better coverage than you can find in many stand alone systems that you can easily install and cost significantly less. The thing to remember about these systems is that they are only good as long as you are in your car for the most part. You may find some that can last so many hours away from a power source (if you have a system that you’ve installed yourself rather than a factory installed system) but most of them aren’t going to offer the greatest features for activities such as geocaching or fishing.
Before you buy, seriously consider and have in mind the activities for which you will use your device. Don’t buy a device that charges for features that you aren’t likely to use and avoid at all cost an interface that isn’t easy to use. Remember you will be using this while on the road most of the time and you want a system that won’t require a concentrated effort in order to operate. We have quite enough distractions to deal with while on the road without adding a difficult to operate auto navigation system.
Auto navigation systems are great to have when you need them and even at times when they simply come in handy though you could have survived without them. For me the security of knowing that I will never be truly lost again is well worth the investment I have made in mine, I honestly believe you will feel the same way about your system once you decide which one is best for you.
