Could an ARM still be the right choice for you?
It may seem silly to get an adjustable-rate mortgage when the rate has nowhere to go but up, but these loans are a good fit in some situations.
Mortgage rates continue to be at historic lows, which raises the question: Why would anyone still get an adjustable-rate mortgage?
With rates about as low as they could possibly be and with nowhere to go but up, where's the upside and logic to financing property with an ARM?
Jacqueline Racz, a loan originator with Pennsylvania-based PrimeLending, has been in mortgage banking since 1993 and has seen shifts in which consumers gravitate to various products. (Bing: Shopping for a home loan)
"Even back in the '90s when fixed rates jumped up into the nines, the ARMs were always very low in comparison," she says. "Right now they just seem so close to each other because fixed rates haven't been this low for a very long time. But ARMs are always popular for certain individuals in certain situations. Everyone is quick to jump on that 30-year fixed, but there are many scenarios to consider."
Where ARMs were once frequently sought out by those scraping by to make a home purchase -- pitting the money saved with a lower rate against the hope that their future income would keep pace with future payment increases -- those seeking out this type of loan these days are more likely to be either wealthier or more strategic.
Racz sees three key areas where homebuyers might gravitate toward an ARM:
- To lower payments further, especially on jumbo loans.
- If they have a job that moves them around every few years.
- If they know that they will be downsizing or moving — after their children finish school, for example — or no longer need the home they are in and that paying the loan off in full over 30 years is not a goal.
On a large loan amount, the difference between 4.5% on a 30-year fixed-rate mortgage and 3.25% on a 3/1 ARM can be hundreds of dollars a month, Racz says.
MSN Money: Mortgage rates fall below 4%
"In addition to lower payments, a lot of them will allow interest-only payments, which can be a significant savings a month," she says. "When you are looking at something in the $700,000 range, going from even a point spread between the fixed and adjustable can save you about $1,500 a month."
jripx: Like I asked, why do you still OWE for your home and have to have loan payments if you are older than me and I am in my 60's? Your home should have been paid for eons ago. You talk about all of your big investments, yet you are still in debt at your age? I am not trying to be snarky, just trying to understand your point of view.
As for how I invest my money.....we aren't rich, so therefore we are not willing to take chances with the money we have saved from our investments at our ages now. Choosing to live in Georgia over Arizona....that is a personal choice. You stay in Arizona and I am happy to stay in Georgia. I love the mountains and have no regrets living my life here.
ok heres the 411
if right now your going to refinance and u intend to stay in that home for at least 3 yrs to recoop the cost to refi and if your going to stay at the home for the term go with the fixed rate if you will be moving in say 5 yrs and the adj rate is not to change for 5 yrs it might be a better bet to get the adj rate a 7-1- arm would be great for this.. its confusing but its all about you and your situation
So now I've got 3 yrs. left on my ARM & I'm in a panic.
Can't get a re-fi to a fixed loan. Ratios are too low. ( or is that too high ?)
Since my home is not worth much more than the balance of my mortgage, the banks don't want to give me a new loan anymore. Plus, I'm not rich enough to get one, even though I have an excellent credit score and have always paid my bills. They also just realized that because I'm not 25 anymore, most likely the only way I'll pay off my mortgage is if I give them all my savings.
NOT going there !!
I used to think (and was told) that as long as U had enuff collateral, the banks would give U a loan. Not so anymore. Now they want U to give them ALL of your collateral & pay off your under-priced, over-mortgaged home. No way baby !! Give U more of my cash so it's in your pocket & I'll never see it again ? NADA. Isn't gonna happen in my lifetime.
I will pay as little as possible on my loan for as long as I can, just to have a place to live in...Hence...the ARM as low as I can get it for.
And when I die, any profit gained upon sale of my estate, will go to my kids. All a bonus to them whatever it may or may not be.
In the meantime...I will save the extra cash I have & not pay it to the bank.
Unless my home value rises soon, my mortgage will stay as close to the top as I can keep it.
If it does rise, I will sell it & probably never buy again.
If I ever do decide to however, I'll do it for the least down as I can, and the lowest payments I can find. Preferably a lot lower than I'd be paying for rent. If not...it won't happen.
I don't intend to get ripped off again if I can help it. I can't afford to !!
Better yet...since I'm older now & on a fixed income, I qualify for low income housing, I may just take advantage of it, and not put myself into a hole ever again.
Tell me this. Why is it that as long as the banks see U have money available, they'll give U a 30 year fixed rate mortgage ? Do they actually expect U to live another 30 yrs., so U can pay it off ?
At what age do they really cut U off from getting a 30-yr. mortgage these days?
Ms Georgia Peach;
You may own your home however at what cost over how many years. Your invested in CD's???
An amazing investor you are. What are they paying about .35% We are in corporate bond funds that pay us over $60.000.00 a year paying from 4.5 to 7.5% as well as other investments making us $125,000.00. You own a home that is worth about 45% less than 5 years ago. Yup, taking your advice is as dumb as bag of rocks. Have a nice day in Georgia, been there however I'll take Arizona over your state even for a free home.