Home Buyer Help

Valid HTML 4.01!

Down Payment Assistance Programs
<<<Back To Articles

Annual Review

Author: Ryann Cairns

One important feature of any adjustable rate mortgage is the annual review period. It is during this important time that the interest rate may be recalculated, and the monthly payments may rise or fall depending on the direction of the underlying interest rate.

Many times the annual review is also the time when the homeowner has the option to convert the variable rate mortgage loan into a fixed rate. Whether it makes financial sense to do this or not, of course will depend on the current interest rate being offered and the expected direction of interest rates. Interest rates are notoriously difficult to predict, even for experts, and few people are able to accomplish this feat consistently.

This is one of the things that makes a variable rate mortgage, and its associated annual review period, somewhat problematic. You are being asked to in effect make a prediction on the direction of interest rates. This is a difficult task even under the best of circumstances. When the annual review period rolls around each year, a mistake on the part of the homeowner could end up costing lots of money in higher interest rates and higher monthly payments.

The annual review can be a helpful feature as well though. If interest rates have fallen over the past year, the annual review can offer the homeowner the chance to save money through a lower interest rate and lower monthly payments. Lower monthly mortgage payments can mean more money in your pocket and even a chance to pay off the home mortgage loan early. No matter what the terms of your annual review period, it pays to know all the terms and conditions of your variable rate mortgage loan up front.

The most important thing to know is the interest rate cap. This is the highest interest rate that can be charged on the mortgage. If interest rates were to rise significantly between the annual review periods, you could very well find yourself facing the highest possible interest rate. It is important to calculate the monthly mortgage payments under such a scenario, and make sure you could still afford them were they to rise to this level. While it is unlikely that rates will hit the cap, it is always a possibility.

It is important to use the annual review period to its best advantage. A month or two before the annual review period arrives, take some time to research the probable direction of interest rates. Of course the experts will not be right 100% of the time, but they can at least provide a clue on where rates are headed. Use this information to your advantage during the next annual review period.

Home Buyer Education:
Lease Purchase Options

Copyright Copyright Notice2003 - 2012 U.S. #TX0006199019 - All Rights Reserved
Privacy Policy/Terms of Use

Printer Friendly Page
Refer Our Website
Credit Repair Techniques
Mortgage Calculators
Benefits to Mortgage Professionals
Benefits to Builders
Benefits to Realtors
Benefits to Sellers
Real Estate Terms
Home Buyer Education
First Time Home Buyer Grants
Charity Resources
Benefits To Home Buyers
Down Payment Assistance Home Page
Frequently Asked Questions
Find Local Professionals
MLS Search
line bar2
line bar3
line bar4
line bar5
line bar6
line bar7
line bar9
line bar10
line bar11
line bar12
line bar13
line bar14
line bar15
line bar16
line bar17
line bar18

Moving Into The Real Estate Investing World

bookmark this page

Link To Us - Your Link is why we are found in the search engines! Please Support Our Site

Down Payment Solutions
Find Success

Other Important Links for down payment assistance and first time home buyers:

Home Buyer Grants By State:
Alabama - Alaska - Arizona - Arkansas - California - Colorado - Connecticut - Delaware - Florida - Georgia - Hawaii - Idaho - Illinois - Indiana - Iowa - Kansas - Kentucky - Louisiana - Maine - Maryland - Massachusetts - Michigan - Minnesota - Mississippi - Missouri - Montana - Nebraska - Nevada - New Hampshire - New Jersey - New Mexico - New York - North Carolina - North Dakota - Ohio - Oklahoma - Oregon - Pennsylvania - Rhode Island - South Carolina - South Dakota - Tennessee - Texas - Utah - Vermont - Virginia - Washington - DC - West Virginia - Wisconsin - Wyoming