Now I don’t know the proper medical term, but I do encounter many borrowers with a FEAR of ARM’s. Not talking biceps/triceps but adjustable rate mortgages.
Fixed mortgage rates had been historically low until June of 2013 and now they are hovering in the 4.25% range. Understandably during that time, most everyone who was buying or refinancing opted for a fixed rate mortgage.
However, the ARM's of today are a very safe alternative to a fixed rate.
Typically, you can get a 5/1, 7/1 and those rates are approximately 1% below the fixed rates so 3.25% range for the 5/1, 3.5 for the 7/1. These ARMS are actually FIXED for the first 5 or 7 years and then they adjust every year thereafter on a yearly basis. There are adjustment caps and typically over the long term, you pay less interest than with a fixed rate.
This is perfect for people:
Here is an example of Fixed vs. 5/1 Adjustable Rate Mortgage
Loan Amount = 300,000 at 4.25%
30 Year Fixed Payment is $1475
ARM payment is $1305
= SAVINGS of $170 per month with the adjustable rate mortgage!
I don’t know about you, but that money could be better spent on improvements, furniture, or adding to your 401K!
Call Mary Hackett at South Shore Mortgage for therapy, I mean a consultation today at 781-264-3106!