Now is a Good Time to Look at your ARM

 

 

 

Index prices over the last five years have been at record highs and record lows. Our current administration has worked to keep them low to offer some relief for the huge amont of mortgage holders holding subprime loans with high margins. The vast majority of subprime mortgage holders have 2/28's or two year fixed rate loans that have already converted. See graph.

 

These indexes are currently at 40 year lows. Fixed rate mortgages are also at 40 year lows. Both are expected to start going up soon so it may be wise to look at your loan again before interest rates get out of hand.

The next wave of loans that will be effected by adjustable rate indexes changing are the option arm loans. Also known as the pay select option arm these loans quite often were written with a three year pre-payment penalty that also has expired. Since the pre-payment penalty has expired it may be worth looking at your loan while all rates are low. Today's Arm prices are hovering below 4%.

You may even wish to consider looking at another adjustable rate mortgage. The difference between todays adjustables and the ones written 3-5 years ago is that the margins are much smaller. Where as a sub-prime loan had a margin of 5-6%, todays adjustables will have margins between 2.25%-3.00%. Very manageable and a lot less scary.

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