5 YEAR ADJUSTABLE RATE MORTGAGES AT 3%!

Many buyers are not aware of the extremely low Adjustable Rate Mortgages (ARM) available, specifically the 5 and 7 year. As of this writing one can lock in for a 7 year ARM for 3.4% rate. The 5 year is even better at 3%. These are conventional rates although FHA which offers lower downpayment and more flexible underwriting criteria is also offering low ARM rates. The rates are quoted by Netcentral Mortgage (netcentralmorgage.com/414-258-7833) which is located in the same building as our central office in Wauwatosa.

In the conservative environment of Southeast Wisconsin most buyers refuse to even consider the ARMs. Yet, if one had been in an ARM for the last 25 years, they would have enjoyed tremendous savings over a fixed mortgage (and would not have to incur refinancing charges AND would have paid off the loan much sooner). As the rates adjusted lower the ARM would have adjusted lower and ARM rates are lower than 30 year rates.

Most buyers have been reluctant to purchase or refinance with an adjustable rate having this fear that rates will go up, yet if one looks at Japan the fixed mortgage rates are close to 2%. In the economic environment we are in, it is very conceivable that fixed rates can continue to move lower to the 3-4% range. Adjustments to the ARM rates at the end of 5 or 7 year anniversary would then translate into a new rate in the 2-3% range.