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Here is a tip for those who are shopping for Adjustable Rate Mortgages (ARMs): the "margin" is almost as important as the initial rate. The margin is the percentage point above the average yields for Treasury notes on which future rate adjustments will be calculated.

Let's compare two hypothetical one-year ARMs. The first may have an initial interest rate of 7% with a 2.5 margin, while the second begins at 6 7/8% with a 2.75 margin. Both loans have rate caps of 2%. Suppose that at the end of the first year of the loan, the average of the one-year Treasury note yield has been 5 1/2%. For each loan, the lenders will add the margin to that 5 1/2% average yield. Thus the interest rate for first loan would increase from 7% to 8%, and the second would go from 6 7/8% to 8 1/4%. While the first ARM had a slightly higher initial rate, it will have lower rates in subsequent years, unless the Treasury note rates increase enough to activate the annual caps on the amount of the increase. There is a wide variance among margins in ARMs offered by competing lenders, and this should be a factor when you decide on your loan.

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Wayne Lyons
Long & Foster
33298 S. Coastal Hwy
Bethany Beach
DE 19930
800-844-9151
302-539-9040 ext. 222
Fax: 302-539-2185
bethany-beach-homes@NUMBER1EXPERT.com

Wayne Lyons will tell you Bethany Beach, Fenwick Island, and the surrounding communties offer the best in life for those looking to make the most of coastal living. It is this love for home that has propelled Wayne to the forefront of his career as one of the area's most trusted real estate professionals. Few things bring him greater fulfillment than connecting others with the exceptional lifestyle here. Whether you are looking to buy or sell, give Wayne Lyons a call today.