A newer type of loan program designed to help you take advantage of a drop in interest rates is the ARC Loan. The interest rate and corresponding payment starts off 1/4% to 3/8% higher than current fixed mortgage rates, but every time mortgage rates fall by a quarter point or more, you are allowed to adjust your rate downward with no closing costs, points, or fees.
For FHA and VA borrowers, only your timely payment history is scrutinized each time your rate is lowered; for conventional loan borrowers, a short credit check, along with payment history and verification of income is required. With this system, your loan is “managed” internally. Although you must wait a minimum of 120 days for the first refinance opportunity, you may lock your rate before that time, and subsequent adjustments can occur as frequently as every 120 days. The program can be applied to fixed-rate or short-term fixed-rate programs.
Jordan Goodman, 2002
Everyone's Money Book on Real Estate
Chapter 4 - Choosing the Best Mortgage
Recommended