The 5-Year ARM Is a Mortgage Steal
Any borrower in the market for a mortgage loan in New Jersey right now should NOT pass up the savings that can be had with the 5/1 adjustable rate mortgage. Rates are unbelievably low compared to the 30-year fixed rate. These mortgages are prime rate, Fannie Mae and FHA loans. We’re not talking about the sub-prime loans of a few years back. Because of this old publicity, so many borrowers falsely believe that ARMs are a bad choice – all the time. Not so.
What is a 5/1 ARM? You can go to this page for more info about fixed and adjustable rates. The “5” means the initial rate will remain the same guaranteed for 5 full years. If your starting rate is 3.75%, you will keep that 3.75% for “five” years. The “1” means after the initial 5 years, the rate can change every year. But increases are subject to maximums. Ask me for details.
There is also a 7/1 ARM where the initial rate remains the same for 7 years. Today, both the 5/1 and 7/1 ARM are substantially lower than the 30-year fixed rate.
But, these products are not for everyone. Perfect candidates are:
- Those who plan to sell or refinance within 5 to 7 years
- Borrowers who need the lowest possible payment.
- Home buyers needing the lowest possible rate to qualify. If you are buying a home, keep in mind that lower rates will help you qualify for a bigger mortgage.
Finally, there is also a 3/1 ARM. Here, the rate will not change for the initial 3 years of the mortgage.
To see if this might be an option for you, ring me or write.
Until my next post . . .
To stay completely up-to-date on all the pending mortgage changes, to see how they will affect you, and get news about interest rates and programs, just read my weekly updates - Click for free email alerts.
{ 1 comment… read it below or add one }
I agree. I’m a Financial Planner and recommending adjustables to many clients who fit the right mix. Superb savings over those years.