Ten Year Adjustable Rate Mortgage (ARM)
This Disclosure describes the features of our 10 Year Adjustable Rate Mortgage (ARM)
and may help to illustrate why this product has been so poplular with "rate surfers". The rate on the 10 year
ARM is better, much better sometimes, then the 30 year fixed rate. For home owners with longer term plans it makes good
sense to consider this loan along with the traditional 30 year fixed rate. Rates are subject to daily change. So please
contact a Loan Officer at Garden State Mortgage for rate quotes and further discussion on this or any of the Company's products.
Key Terms Defined
INITIAL INTEREST RATE
The yearly rate of interest paid on the beginning date of the note are which
is not related to the INDEX or MARGIN. This rate may be a below market rate.
INITIAL MONTHLY PAYMENT
The amount required to fully amortize your loan balance over its term at the INITIAL INTEREST RATE.
NEW INTEREST RATE
The rate to go into effect on a CHANGE DATE which is calculated by adding the
MARGIN to the CURRENT INDEX. In the event this figure is not evenly divisible by one-eighth,
then the Note Holder will round the result to the next highest one-eighth of one percentage point (0.125%).
INDEX
The Monthly Average Yield on United States Treasury Securities adjusted to a constant maturity of one year.
CURRENT INDEX
The most recent INDEX available 45 days prior to the CHANGE DATE.
CHANGE DATE
The date each year that the interest rate could change.
CAPS
Limits on the adjustments made in your interest rate which will provide some degree
of predictability to you.
MARGIN
The amount added to the CURRENT INDEX to arrive at the new INTEREST RATE after rounding.
LOAN CLOSING
The date the mortgage and note are signed.
DEMAND FEATURE
This loan does not contain a Demand Feature.
LOAN TERM
This example provides data based on a 30 year term, but can serve as an example of the requirements
for any loan with a term exceeding 20 years. Your term is not affected by an interest rate and payment changes.
NEGATIVE AMORTIZATION
The gradual increase in the balance of a loan caused by adding unpaid interest to the loan
balance. THE LOAN TERMS OF THIS PROGRAM WILL NOT RESULT IN NEGATIVE AMORTIZATION OR AN INTEREST
RATE CARRYOVER.
HOW YOUR INTEREST RATE IS DETERMINED
Your INITIAL INTEREST RATE will be that rate which is in effect at the time we receive your application.
Your NEW INTEREST RATE will be calculated by adding the MARGIN to the CURRENT INDEX. In the event this figure is not evenly divisible by one-eighth,
then the Note Holder will round the result to the next highest one-eighth of one percentage point (0.125%). This calculation of the NEW INTEREST RATE
is subject to the CAP limits on Interest Rate Changes.
Your MARGIN will be that amount which is in effect at the time we receive your application. Ask us for our current INITIAL INTEREST RATE, MARGIN and DISCOUNT FEATURES.
Current information on the INDEX may be found in the Federal Reserve statistical release G.13(415) which is published monthly. To obtain copies of this release you may write to the:
Board of Governors-Federal Reserve System
Publication Services, MS 138
Washington, D.C. 20551
HOW YOUR INTEREST RATE CAN CHANGE
The first interest rate CHANGE DATE will occur 120 months after your loan is closed on the first day of the month following the anniversary month of LOAN CLOSING. After the first interest rate change, your interest rate will be changed on the same day every 12 months.
Your interest rate cannot increase nor decrease more than 2 percentage points in any year following the initial 120 month period. Your interest rate cannot increase nor decrease more than 5 percentage points from the INITIAL INTEREST RATE over the LOAN TERM.
HOW YOUR MONTHLY PAYMENT CAN CHANGE
Your INITIAL MONTHLY PAYMENT will change yearly (after the initial 120 month period) based on each change in the NEW INTEREST RATE. Your monthly payment will change in order to amortize your remaining balance over the remaining term.
EXAMPLE
The example below shows how your payments would have changed under this ARM program based on actual INDEX changes that occurred in the month of January from 1982-1996. This does not necessarily indicate how your mortgage rate will change in the future.
The Initial Interest Rate listed below is reflective of a rate charged within the past six months and is not necessarily reflective of rates quoted at the time of your application.
The example is based on the following assumptions:
| Amount |
$10,000 |
| Initial Interest Rate |
7% |
| (not related to INDEX used to make later adjustments |
| Term |
30 years |
| Interest Adjustment |
Yearly after initial 120 months |
| Margin |
2.75% |
| Rounding |
Next highest 1/8 of 1% |
| Caps |
2% Annual |
| Caps |
5% Lifetime |
| Index...Monthly Average Yield of U.S. Treasury Securities adjusted to a constant maturity of One Year. |
Year
(As of January) |
Index
(Percent) |
Margin
(Percent) |
Interest
Rate
(Percent) |
Monthly
Rate
(Percent) |
Remaining
Balance
(Dollars) |
| 1986 |
7.73 |
2.75 |
7.000** |
66.53 |
9,413.16 |
| 1987 |
5.78 |
2.75 |
7.000 |
66.53 |
9,269.16 |
| 1988 |
6.99 |
2.75 |
7.000 |
66.53 |
9,114.74 |
| 1989 |
9.05 |
2.75 |
7.000 |
66.53 |
8,949.17 |
| 1990 |
7.92 |
2.75 |
7.000 |
66.53 |
8,771.62 |
| 1991 |
6.64 |
2.75 |
7.000 |
66.53 |
8,581.24 |
| 1992 |
4.15 |
2.75 |
7.000 |
66.53 |
8,377.10 |
| 1993 |
3.50 |
2.75 |
6.250 |
62.86 |
8,139.60 |
| 1994 |
3.54 |
2.75 |
6.375 |
63.44 |
7,890.00 |
| 1995 |
7.05 |
2.75 |
8.375*** |
72.65 |
7,670.74 |
| 1996 |
5.09 |
2.75 |
7.875 |
70.39 |
7,421.29 |
**This rate is not related to the MARGIN or INDEX, but
reflects a rate
used recently by this institution.
***This interest rate reflects a 2% annual interest rate cap.
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NOTE
The above example (due to recent market conditions) does not call for the
5% lifetime cap to be put into effect. Based on the Initial Interest Rate of 7.000%, the maximum amount that
the interest rate could rise under this program is 5 percentage points to 12.00%. Should this increase have been
called for it’s earliest scenario, in year 13 of this example, the monthly payment could have risen to a
maximum of $93.74.
To see what your payments would have been during that period divide your mortgage
amount by $10,000., then multiply the monthly payment by that amount. (For example, in 1996 the monthly payment for a
mortgage amount of $60,000 taken out in 1988 would be: $60,000 divided $10,000 = 6, and 6 x $70.39= $422.34 per month.)
For example on a $10,000, 30 year loan with an INITIAL INTEREST RATE of 7.875%
(the rate shown in the Monthly Rate column above for the year 1996), the maximum amount that the interest rate can
rise under this program is 5 percentage points to 12.875%, and the monthly payment can rise from a first-year payment
of $72.51 to a maximum of $101.00 in the thirteenth year.
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