Return of the ARM
No, this is not some late-summer horror flick. I’m talking about adjustable rate mortgages and how they are now an attractive alternative to fixed rate mortgages.
If you are thinking about buying or refinancing, you owe it to yourself to take a look at an ARM. The interest rate on a 5-year ARM is currently about 4 percent. Four percent! That is incredibly cheap money.
In fact, I don’t recall ARM rates ever being this low.
The savings can really add up quickly or you can use the lower rate to increase your buying power. Current 30 year fixed rate home mortgages are running around 5.375 percent. On a $200,000 mortgage, that’s a savings of about $165 per month.
Or, use that $165 per month for a larger mortgage. That translates into more than $34,000 of additional borrowing power. So, your $240,000 search ceiling becomes $274,000.
If it’s likely you will move again within the next five years then you have no need to worry about a rate hike at the end of the initial rate term and you are saving almost $2,000 per year in principal and interest payments.
That’s a much better ending than any summer horror film.
Posted by:
Steve Bauman
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