Adjustable Interest Rate (ARM) Loan Program

7 year ARM, 5 year ARM, 3 year ARM, 1 year ARM, 7/1, 5/1, 3/1, 1/1

An adjustable rate mortgage (ARM) is a loan with an interest rate that can be adjusted at pre-set intervals. The amount of the adjustment depends on several factors outlined below. Some ARM loans have an initial period when the interest rate is fixed for a period of time 2,3,5,7,or 10 year. After the fixed period the loan converts to an adjustable rate mortgage. Some ARM loans are adjustable during the first year with adjustable beginning after 1,3,6, or 12 months. Usually, there is a cap on the rate, which determines the highest the rate could ever go after the ARM period is over. Adjustable Interest Mortgage (ARM) loans adjust based on the following factors:

Index:
The index of an ARM is the financial medium that the loan is “attached” to, or adjusted to. The most familiar indices, or, indexes are the LIBOR (London Interbank Offered Rate), 1-Year Treasury Security, 6-Month Certificate of Deposit (CD), Prime, and COFI (the 11th District Cost of Funds). Each of these indices moves up or down based on fluctuations in the financial markets.
Margin:
The margin is one of the most significant aspects of ARMs because it is added to the index to determine the interest rate that you pay. The margin added to the index is known as the fully indexed rate. As an example if the current index value is 4.250% and your loan has a margin of 2.0%, your fully indexed rate is 6.250%. Margins on loans range from 1.75% to 3.5% depending on the index and the amount of the loan.
Payment Caps:
Several loans programs have payment caps as a substitute of interest rate caps. These loans programs diminish payment shock in a rising interest rate market, but can also lead to deferred interest or “negative amortization”. Such loans normally cap your annual payment increases to 7.5% of the previous payment.
Interim Caps:
This limits how the interest rate can be changed each time it is adjusted. The cap is usually between 1 and 2%.
Lifetime Caps:
Practically all ARMs have a maximum interest rate or lifetime interest rate cap. However, the limit of lifetime cap varies within each company and different loan programs. Loans with low lifetime caps usually have higher margins.

Advantages:

ARM allows you to have lowest interest rate lower monthly payment for a short period.
You have option to refinance if interest rates drop.
Rates and payments may go down if rates improve.
It is a great program if you want to sell the house shortly.
May qualify for higher loan amount.

Disadvantages:

Normally one must refinance after the ARM period is over otherwise the rate could be higher.
It is likely that after the ARM period you might have to refinance at higher rate if the interest rates are high.
Payments may change over time.

Client Testimonials

Thanks PacShores for coming through for me in the nick of time. After our Parents passed away and left the small apartment units that I was living in to me and my two siblings, they needed to get out their portion of the inheritance and were determined to force me to sell the units. I needed to keep the property for my family and avoid selling in such a down Market. My Income was low and the Banks refused to accepts the Rental Income from the other Tenants and to approve my loan. It wasn’t a problem when I contacted PacShores, they funded my loan in no time, paid off my siblings, hassle free, and I am very glad I found them.

Tony – Orange, California

I took over some Apartments that my Dad owned and had been renting out over the years. Some of the tenants had been there for 10 years and more, the Properties have gotten in disrepair, and the County had also filed substandard violation Liens on the Properties. All the Lenders that I had applied to for a Cash-Out Loan, turn down my application due to the condition of the Properties. With the help of the Loan Officers at PacShores, we were able to customize a loan for me that set aside funds to complete the needed repairs, and clear up all the Substandard Notices and Liens on the Properties, and the extra cash that I needed.

Tracy – Los Angeles, California

Hi, I am Real Estate Broker, and Short Sale specialist, and I had very well qualified Buyer with almost 50% cash down payment, under contract on a highly discounted Investment Property purchase. After 3 weeks of getting the runaround with their Bank including my regular Lenders that I normally use, I was convinced they would lose out on this great deal. Luckily an associate referred me to PacShores Mortgage, and within 24 hours they drove buy the property, and had Closing Documents in Escrow by the third day and funded the loan right after. They saved this deal for us. I couldn’t thank them enough and would use and recommend them to all my associates in the future.

Javier – West Covina

Hello, our Credit Scores had become so low after we went through a Loan Modification process and Short Sale on our previous house. Thereafter, we couldn’t find a Bank willing to consider us for a new Home Loan, even though we had substantial funds for a Down Payment. The folks at PacShores Mortgage were very understanding and glad to review and approve our loan application. Thanks to them, we are proud owners of a new, more affordable four Bedroom house again.

Susan – Fresno, California

My wife and I own a successful and profitable Business, and also own a number of Rental Units. Due to the Freeze in Bank Lending we decided to refinance one of the Rental Units we own outright, to access the credit we need to efficiently run our Business. Unfortunately due to the write-offs we show on our Tax Forms, the Banks we contacted were misreading our Income and cash flow and declined to approve our loan application. Our experience was different at PacShores, the easily identified our true Income and approved our loan promptly, and we didn’t even need to provide them any Tax Returns.

Cindy – San Diego, California