There has been a lot of talk about adjustable mortgages and the trouble they have caused some people. If you are in an ARM that is not working for you, we can look to see if you have any other options. First we will need to determine which type of ARM you have before you panic. There are two types and there is a big difference between the two.

Conforming ARM: A loan that is fixed for a period of time and at the end of that time the rate will change. It has a rate cap and a maximum percentage increase cap per year. Some ARM’s allows you to pay interest only and others you are paying both the principal and the interest.

PAY OPTION ARM: This loan enables a borrower to start at a lower interest rate. After the first year, the interest rate adjusts monthly and the payment adjusts annually. Different payment options are offered that include fully amortizing, interest-only, or a "minimum" payment. The minimum payment option results in a growing loan balance, termed "negative amortization". Most of these loans also have pre-payment penalties for up to 3 years that will charge you a percentage of the loan if you choose to pay it off early.

How long before a Conforming ARM adjusts? Typically the fixed terms are for 1,3,5,7 and 10 years. At the completion of the chosen term the rate will change to current market rates.

How long before a PAY OPTION ARM adjusts? The payment will adjust after the first year and every year after. There is a rate cap and a payment percentage cap that they may increase your payment. Exception to that payment increase cap is if the loan balances exceed 125% of the original loan balance, then the payments can be accelerated to make up this deficiency.

You may have options but we understand that trusting a lender is very difficult right now. It will not cost you anything to simply give us a call and discuss a direction you might be able to take. Don’t wait too long, call today and we will listen, give you choices and you will be treated with the respect that you deserve.