Like a lot of people, I never thought I would see a 7.0% rate on a 30-year fixed mortgage again. But here we are. And it appears that 7.0% is the breaking point for most borrowers. Rates have simply moved too fast and too high. The result has been a significant demand in Adjustable Mortgage Rate (ARM) loans.

Historically ARMs amount to about 5% of the total mortgage loans. Yes, 95% of people tend to go with a fixed rated for various reasons. In the latest surveys, ARMs now amount to about 15% of the total demand — three times higher than normal. The reason is the difference in rates between ARMs and fixed rates. Depending on someone’s credit score and other factors, a fixed rate may be 7.0% – 7.5% right now versus an ARM at 5.25% — 5.75%. And these are ARMs that have a fixed rate for 5, 7, or 10 years!

ARMs are not for everyone, but here’s why they make sense right now:

  • Much lower rates
  • Rates low enough for consumer acceptability
  • Payment savings of about $100 per $100,000 borrowed versus fixed
  • Borrowers can choose from a rate that fixed for up to 10 years
  • Rates are expected to come down in the next 12-24 months and borrowers can refinance to a fixed rate at that time

Additionally, when clients refinance with us, there is no refinance process — no financials needed, no appraisal, and no closing. Since we own the loan, we simply lock it in and send the borrower a one-page modification form. Very simple. There’s a flat fee of $300 — $750 depending on the loan size.

While we work through these high rates, ARMs can be a great option to get a “low” rate until they go lower over the next few years and not miss out on that new home purchase. 

If you or someone you know is thinking of buying a home, reach out to me via my website, or call 847-214-2404 to discuss ARM options that make the most sense for you. For more tips and our latest updates, check us out on Facebook, Twitter, LinkedIn, or Pinterest!

Ed Currie