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When to use an Adjustable Rate Mortgage for a Downey CA home

Adjustable Rate Mortgage can be a great option for the right circumstance.

Did you take advantage of Prime day this week?  Here is an interesting statistic. Apple has made more profit in three months than Amazon has generated during its entire existence. That has not stopped Jeff Bezos from becoming the richest man in history this week as the appetite for Amazon stock continues to grow.

But enough with fun facts. Let’s talk ARM’s (Adjustable rate mortgages). As mortgage rates have increased over the last year, the expectation across the industry has been for a big uptick in consumers preferring to get an ARM product at a much lower rate than the traditional 30 year fixed. The ARM product rate typically stays fixed for a pre-determined amount of time (3, 5, 7, 10 years) and after that time period becomes adjustable with the movement of market index’s (typically LIBOR).

However, the expected large uptick in these types of mortgages has yet to materialize. A big reason for this is most likely due to people being very shy of the product after the mortgage bust a decade ago. Leading up to the bust, there were all sorts of ARM products out there and they seemed to have gotten a bad rap. The truth is for the right person they can be a great option.

People on the most part are risk averse when it comes to their home mortgage and prefer to know what the rate will be until their loan is paid off. The average family only staying in a home for 13 years. Does it really make sense to have a 30 year mortgage with a higher rate? That is something to ponder on. If you are in the market for a home loan make sure to discuss all the options with your mortgage professional.

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