Home : Blogs : Robert W. May, Realtor/Mortgage Expert Lethbridge Mortgage & Real Estate Info : Robert W. May's Blog

3 yr ARM vs 5 yr ARM?

Let's just take a second and compare these 2 products.

We start with the attractive low interest rate of Prime for 3 years. Next, consider the change in ARM pricing over the past 6 months and the likelihood of this continuing. Why would you want to lock in a customer to a 5 year ARM when there is a downward trend in ARM rates? Instead, offer them a shorter ARM term - say, 3 years - which would allow them to renew into another ARM sooner (and at better pricing). The financial benefit for your customer could be huge. A hypothetical example follows:

Mortgage amount $300,000, 25 year amortization. Assume Prime is constant

Current 5 year ARM Rate: Prime + .10%. Current 3 year ARM Rate: Prime. Hypothetical ARM Rate 3 years from now: Prime - .50%

- Taking a 5 year term now, the customer would pay $32,438 in interest over the 5 years.

- Taking a 3 year term now, the customer would pay $19,259 in interest over the 3 years. Plus, they would pay an additional $9,150 for the next two years, for a total of $28,409. That’s a savings of $4,029 or 12%.

Here are a few of my favorite past articles from my Lethbridge real estate and mortgage blog you might have missed or wish to recommend them to a friend.

The Most Reblogged Post EVER - Could this blog be the most reblogged ever?
Lethbridge Real Estate - Popular Lethbridge real estate searches
Lethbridge Basement Suites - Advice for every landlord
MLS Sales Rising - Sales are picking up, don't miss out
WANTED: Single Women: - Single women are a hot mortgage market
Common Financial Problems - Avoid these financial mistakes
Get Your Credit Score UP - Invaluable insight into your credit score
Mortgage Guidelines Get Tighter - Harder and harder to borrow money
Is Your Mortgage Company Out of Business in 2009? - What to do when your bank goes broke
What is wrong with MLS - Is your info being abused?
Survivor - Real Estate Edition - Let's vote a few more off the island

lethbridge realtor

Robert May is a Realtor, as well as the broker and owner of Rainbow Realty of Lethbridge Alberta . He is also a licensed Lethbridge mortgage broker and financing expert with Canada First Mortgage of Calgary Alberta. He has been in the Lethbridge real estate industry since 1993 and offers full Lethbridge MLS real estate services to Lethbridge and surrounding area, as well as Lethbridge mortgage financing, mortgage refinancing , preapprovals, and Lethbridge loans financing to Lethbridge and Southern Alberta. He can be found online at this link: mortgage broker Lethbridge

Let me share my 15 years experience in the local Lethbridge real estate and financing market with you! It is the first step towards making a profitable real estate decision.

Posted by Robert W. May, Realtor/Mortgage Expert Lethbridge Mortgage & Real Estate Info on 10/05/2009 11:47 PM

Comments (5)

Statistics in the ActiveRain Channel

statistics

Originally posted at: Lethbridge Real Estate and Mortgage Info: 3 yr ARM vs 5 yr ARM?

This post has been included in Alberta Information Calgary Region, AB Information Calgary, AB Information
Post is included in group: The Lounge at Active Rain
Post is included in group: Realtors®
Post is included in group: Mortgage Resource (Canada)
Post is included in group: LATE NIGHT - EARLY MORNING AT ACTIVERAIN
Post is included in group: INTERNATIONAL REAL ESTATE - Become a global agent rather than a local agent

5 Comments on 3 yr ARM vs 5 yr ARM?

OCT

Today's fixed rates are very low. It seems buyers should give them strong consideration if planning on owning the home more than 3 years. Most economists do not believe interest rates can be manipulated much longer and they will rise. It all depends on how big a gambler the buyer is.

OCT

I agree with John. Rates certainly will rise in the US.

Interest rate predictions are certainly all over the map. In recent months though we have seen our variable rate products drift lower and lower, indicating that our Canadian lenders expect that short term trend will remain fairly stable at where they currently are.

I still have most customers choosing fixed terms.

Robert - I cringe with I see the name arm in a mortgage because I got screwed by one before!

VB ;o)

They are not for everyone, however I am getting screwed by a fixed rate mortgage right now myself. Pretty much anyone who locked in during the past 12 months is paying more than they would need to on a refinaince or an ARM. Definitely have to do your homework to know which is better.

Leave a response…

Name:

Email:
(optional)

Comment:

What does the graphic say?