Loan Programs

ARM (Adjustable-Rate Mortgages)

Borrowers go for an Adjustable-Rate mortgage when they prefer to begin their loan term with a lower interest rate and plan to reside in their property for the short-term. Like the fixed-rate mortgage product, there are several advantages to adjustable rate mortgages depending on your situation. If you plan to sell your home soon or purchase another home, an adjustable rate mortgage may benefit you.

Do not assume you will be able to sell your home or refinance your loan before the rate changes. The value of your property could decline or your financial condition could change. If you can not afford the higher payments on today\'s income, you may want to consider another loan.

In order to explain how an adjustable rate changes over time, please find an example below of how the rate caps and adjustment periods operate:

5/1 LIBOR ARM (5/2/5)

The loan product is a 30 year term during which the first 5 years are at the fixed rate being quoted. After the first five years (60 months) of the fixed rate, the loan will change to an adjustable rate mortgage (ARM) for the remaining 25 years. Each year thereafter (the "1" represents subsequent adjustment periods) there will be a rate adjustment based on the index of the loan, plus a fixed margin.

    Once the loan begins its adjustments it will have rate caps:
  • The first "5" in the "5-2-5" means that the rate can adjust no more than 5% over your original interest rate for the initial adjustment.
  • The "2" means each year from that point, the rate cannot adjust more than 2% (up or down) from the previous rate. If for instance, the index and margin amount to LESS than the 2% cap (1.5% for example) then it will adjust 1.5%. The 2% is the absolute maximum the interest rate can change.
  • Finally, the last "5" represents the lifetime cap of 5% over the start rate.

For borrowers interested in adjustable rate products, the lender is required by law to issue reading material so that they understand the parameters of adjustments, caps, and anything else related to ARMs.

For additional information please click HERE.

* Early/Pre-Payment Penalty *

Victoria Financial Corp does not have any prepayment penalty; HOWEVER, fees may occur if you decide to pay off in full or close your loan before 6 months depending on the lender. Please check with our office for details.