In today’s market with historically low interest rates, adjustable-rate mortgages (ARMs) have largely fallen out of favor. Part of this was due to shared blame for the foreclosure crisis, but much of it has to do with buyers wanting to have a fixed, low interest rate for the entire life of their mortgage. So why are ARMs coming back?
ARMs offer significant savings for luxury home buyers, and according to the Wall Street Journal, nearly half of new jumbo loans have adjustable rates. While fixed rates around 4% for jumbo loans offer savings over the life of the loan compared to previous interest rates, a 5/1 ARM at 2.8% interest for the first five years is significantly greater. On a $1.5 million jumbo loan, that’s a savings of nearly $100,000 in interest!
While the potential interest rate increase may be a concern for some luxury buyers, high net worth individuals face low risk due their ability to access liquid assets. Lenders also prefer ARMs as they will be able to receive future market interest rates instead of being forced to hold a mortgage that’s earning less than market value.
If you’re considering a change, please contact The McKinley Group today! We can help you find the best loan programs for you and put you in touch with the people to make it happen.
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