Adjustable Rate Mortgage Marketing Primer

LEARNING ABOUT ARM LEAD CREATION

Adjustable Rate Mortgage Leads (ARM) are mortgagors with variable interest rates. Economic indices such as Constant Maturity Treasury (CMT), Cost of Funds Index (COFI), and London Interbank Offered Rate (LIBOR) influence ARM interest rates. It's the increases and decreases in indices that are responsible for a corresponding rise or fall in interest rates. Monthly payments must adjust accordingly.
Terms Used in Mortgage Marketing:

• Fully Indexed Rate - The fully indexed rate or the total interest rate is a sum of the margin and index..
• Index. - This is a guide used by lenders to compute interest rates. As mentioned above, changes in indices affect the interest rate.
• Margin - The margin is an interest rate, expressed in percentage, which represents the lender's gross earnings on the loan. It includes the cost of doing business and the profit gained during the transaction.
• Adjustment period - This covers the interval between potential interest rate changes.
• Rate Caps - Rate Caps regulate interest rate increases. There are two types, periodic and overall. Periodic caps limit interest rate increases between adjustment periods. Overall caps, on the other hand, limit interest rate increases during the entire period covered by the loan.
• Payment Caps - Payment Caps regulate monthly payment increase.

BENEFITS OF GENERATING ARM LEADS:

The most obvious and appealing benefit of the ARM is its low initial interest rates and monthly payments. It is easy to be taken in when comparing ARMs with fixed-rate mortgages. ARMs almost always have lower interest rates and monthly payments, that is, initially. These lower rates are available during the first period before any changes in interest rates and mean you can become eligible for larger loans.

For Adjustable Rate Mortgage Marketing Leads that plan on only staying for several years in theirnew home, the ARM will give the best rate for the first few years.

ARM's are also markedly best when the current budget is a bit tight but a pay raise is in sight.Lower preliminary rates can fit your budget and your extra resources can support later payment changes.

The Bad Features of an ARM

Take into account that with the contact of Adjustable Rate Mortgage Leads the changing interest and payment charges trigger a desire to refinance. These leads have been through variables of payment shock, negative amortization, and/or prepayment penalties that include conversion fees. All of this is part and parcel of their focus which was fixed solely on low initial rates to the possible detriment of their futures. After they wallowed in the luck of the initial period, they were hammered with interest rates and monthly payments that would ultimately be impossible to manage month to month.

The negative amortization ( when payment caps)*6 will not allow the consumer to pay the monthly interest. These unpaid monthly interests are added back to the balance. and the homeowner may end up owing more money than they borrowed.

Another consideration is that an ARM will incur the risks of more interest rate increases, working into prepayment penalties in the refinance of the ARM loan, Selling the home or paying off the ARM early. Conversions fees may also be charged for those buyers who want to shift to fixed-rate mortgages.

Mortgage Marketing Strategies Fitting Our Times

Adjustable rates allow both the lender and the borrower to share in the interest rate risk.

Having a prospect that is trying to get out of an adjustable rate mortgage can be a benefit to both parties. The homeowner can either luck out and get lower interest rates or lose out if interest rates rise as we are seeing during this 3rd Quarter 2008. Likewise payment caps may work either for or against their loan. Preventing excessive increases in monthly payments, or predisposing them to negative amortization.

Adjustable Rate Mortgage Marketing Leads are just like other loan seekers in that they do not know for the most part what they want and what can be dispensed to them. You often have to advise them on advantages and disadvantages. With your Adjustable Rate Mortgage Loan List you have the information to move forward when placing them in the proper loan and making them ARM Loan homeowners. The beauty of this is that they will give you a call when they are ready to work with their finances down the road.

Adjustable Rate Mortgage (ARM) Marketing & Lead Gen