I saw a post by a fellow agent on Facebook asking our opinions on the below article from the Wall Street Journal. It talks about how Adjustable Rate Mortgages (ARMs) are seeing more interest from borrowers, but lenders insist that instead of focusing on subprime borrowers, they are marketing to the “jumbo” loan market.
I believe these loans still have a place in our market, even for non-jumbo borrowers. For example, I refinanced my own home to a 5-year ARM loan in 2012- where the interest rate is fixed for 5 years before adjusting each year. I locked in a paltry 2.75% interest rate for 5 years, cutting my interest rate 45%. I now save $414/month on my mortgage, and the cap is 7.75% once it starts adjusting. Even if it got that high I wouldn’t be paying any more than I already was when i bought the house, probably STILL less. And with 5 years of a 2.75% interest rate, more of my payment is going towards principal and NOT interest.
It does beg the question – has the media lambasted the ARM loan to a point where consumers don’t even consider them without knowing the details? With a good down payment and a short-term window, ARM loans are a great way to save money. You can get them in 3, 5, or even 7 year terms, all with lower fixed rates than conventional financing.
What are your thoughts?
David R. Madaffari, Realtor
Keller Williams Realty – First Choice
Cell: 225.772.3283 (DAVE)
37325 Market Place Dr. Ste D
Prairieville, LA 70769
Each office independently owned and operated