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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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McGavisk Realty Team
Keller Williams - McGavisk Realty Team
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Newark, DE 19702
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Michael McGavisk knows that there is only one way to make their clients successful, and that is to do it as a team. Their team oriented approach says it all. Michael McGavisk has gone to great lengths to ensure that he equips his clients with a full service team that provides many years of real estate experience and knowledge. In addition, The McGavisk Realty Team also thrives on diversity. Don't be surprised if your team member that you are working with has a chemical engineer or paralegal background. Not to mention, as you begin working with The McGavisk Realty Team, you will find that they fully embrace and love challenges and are 100% determined to satisfy their client's needs. Not a bad idea to consider working with The McGavisk Realty Team and become part of their team!

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