For the past several years the hybrid adjustable rate mortgage [ARM] was window dressing. NOBODY took them out. The difference in pricing was negligible. Something funny is going on in the midst of the mortgage rate panic of the past 10 days. THESE RATES LOOK GREAT. Even the FHA ARM is making a comeback with its 1.75% margin and 1/5 caps. Why go for a fixed rate if you can go with a hybrid and save a lot of money in monthly payments and not have any rate adjustments for 3 or 5 years. A 5/1 ARM could save well over 1% in the note rate. So it would take 6 years to even reach the fixed rate levels we see now. And a lot can happen in 6 years.
Conventional loans can adjust at higher margins and 2% in any given year with the initial cap being 5%, so there is more inherent risk there. But there is also a 5 year period to watch fixed rates and to refinance if those rates go back down. There seems to be more appetite for these loans right now on the part of lenders due to shared risk perceptions and averse feelings toward a portfolio of fixed rates in the 4s. So, you may want to consider this as an alternative to the nerves of ever climbing fixed rates.
Comments