| value of the financial index. The bank seeks to make a profit above the costs of inflation. The index is fixed rate home equity line of credit measure of the cost of funds as measured by inflation. Index - A publicly published financial index such as LIBOR (usually 1 month, 6 month or 12 month), 11th District Cost of Funds Index, MTA, etc. Start Rate - The introductory rate provided to purchasers of ARM loans for the initial fixed interest period. The difference between the "Start Rate" of fixed rate home equity line of credit ARM and the rate of a fixed terms loan is that the "Start Rate". Period - This is the frequency of adjustments, the longer the rate remains fixed, the better the loan is for fixed rate home equity line of credit borrower. Typically, the shorter this is the lower the rate, since there are more opportunities to adjust upwards. Floor - A clause that sets the minimum rate for the interest rate of an ARM loan. Most loans come fixed rate home equity line of credit a Start Rate = Floor feature, but this is primarily for Non-Conforming (aka Sub-Prime or Program Lending) loan products. This prevents an ARM loan from ever adjusting lower. An "A Paper" fixed rate home equity line of credit typically has either no Floor or 2% below start. Initial Change Cap - ARM loans have a specified maximum first adjustment that is typically higher than allowed on subsequent changes. Periodic Change Cap - The maximum interest rate adjustment for every subsequent periodic adjustment. Life Cap (Ceiling) - The maximum upwards adjustment of an ARM loan. Typically on first mortgages no more than 6% Crucial Information About Caps Loan caps provide payment protection against payment shock. Most First Mortgage loans have a 5% or 6% Life fixed rate home equity line of credit Higher risk products, such as Monthly Adjustable loans with Negative amortization and Home Equity Lines of Credit aka HELOC have different ways of structuring the Cap than a typical First Lien Mortgage. fixed rate home equity line of credit Lien Caps with no Negative amortization Most First Mortgage loans have a 5% or 6% |
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