Adjustable Rate Mortgage (Hybrid/ARM)
There are many different programs available in this category. However, since the financial crisis the entire industry has been heavily regulated and the loans that received much of the negative press, which lead to the financial crisis have been outlawed.
Today, the 3/1, 5/1, 7/1 and 10/1 Hybrid ARM programs offer a high degree of predictability and safety. They are also structured in such a way that is rather standardized so that borrowers may actually understand how they work, what to expect, and how to use them. For example, a 3/1 Hybrid ARM will give you a fixed interest rate for the first three years, a 5/1 Hybrid ARM will give you a fixed interest rate for the first 5 years, etc. Also, in general you may receive a lower interest rate and payment on a 3/1 ARM than you would a 5/1 ARM. You may receive a lower interest rate and payment on a 5/1 arm than you would a 7/1 ARM, 10/1 ARM or 30 year fixed.
Expect the unexpected
Many people that are looking for a refinance are looking to secure a 30 year fixed mortgage. However, are you sure you will never need to finance, or take cash out in the future? Most borrowers refinance every 3-5 years or so for one reason or another:
- Interest rates may be lower than they were when you originally got your loan.
- Perhaps you may have kids going to college.
- A desire for home improvements.
- Add solar panels (and potentially have a net savings on energy costs).
- Consolidate debt.
- Make a major purchase.
- Need money for real estate, starting a business, or other investment.
- Decide to sell your home at some point to down size or even upgrade.
Let’s face it, a lot can happen in 30 years and all of these are real world examples that would cause someone to refinance before the home is paid off in 30 years.
Many financially savvy borrowers anticipate these real world events and plan ahead of time by taking advantage of the secure and readily available loan programs.
To find out which loan program is right for you, speak with a loan professional today!