This disclosure describes the features of the Adjustable Rate Mortgage (ARM) programs that Central Savings Bank offers.
How Your Interest Rate and Payment are Determined
Your interest rate will be based on an index rate, plus a margin
Your payment will be based on the interest rate, loan balance, and loan term.
The interest rate will be based on an index related to the weekly average yield on one year U.S.
Treasury Securities adjusted for a constant maturity of one year, plus a margin of 3.5%. Ask us for
our current interest rate and margin.
Information about the index rate is published in the Wall Street Journal under Key Interest Rates.
Your interest rate will equal the index rate plus our margin unless your interest rate “caps” limit the
amount of change in the interest rate. Your interest rate will be rounded up or down to the nearest
one-eighth percent (0.125%).
How Your Interest Rate Can Change
The first adjustment to our interest rate and payment will occur no sooner than twelve (12) months
after closing. Subsequent adjustments will occur once each year after the first adjustment.
Each year, 45 days prior to your loan anniversary date, the Bank will send to you an initial notice. This
notice will inform you of your new interest rate as determined on that date by the base index described
above. The notice will also inform you of the date your new rate is effective, the amount of the rate
change, the loan balance, the new payment amount, and its effective date.
Your interest rate cannot increase or decrease more than two (2) percentage points per year.
Your interest rate cannot increase more than six (6) percentage points over the term of the loan.
Your interest rate will never be less than 6.25%
How Your Monthly Payment Can Change
Your monthly payment can increase or decrease substantially based on annual changes in the interest
For example, on a $10,000, 20-year loan with an initial interest rate of 6.25 percent in effect July 1, 2012
the maximum amount that the interest rate can rise under this program is 6 percentage points, to 12.25
percent, and the monthly payment can rise from a first-year payment of $73.09 to a maximum of
$111.81 in the fourth year. To see what your payment is, divide your mortgage amount by $10,000;
then multiply the monthly payment by that amount. (For example, the monthly payment for a
mortgage amount of $60,000 would be: $60,000 / $10,000 = 6; 6 X $73.09 = $438.54 per month.)
“Information on other adjustable rate mortgage programs is available upon request.”