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Don't let lenders scare you if you have an ARM

By Michael Smalley

Mortgage and Lending with Waterstone Mortgage - The Wellington Group

June 30, 2008 11:50 AM

You can't turn on a TV without seeing a mortgage lender trying to take advantage of the public's fear of adjustable rate mortgages. This fear is just in some cases, but not justified in most. If you have a standard ARM tied to the LIBOR index, with a 2.25% margin, your fully adjusted rate, were it to adjust today, would be around 5.75%. While some Subprime ARM's with margin's over 6% are very toxic, a conventional ARM is not a bad loan to have today. I am advising many of my clients to let their rate adjust rather than incur closing costs to refinance.

Mike Smalley

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Ken Land

Fairway Independent Mortgage - Weddington, NC

NMLS#108157

It is a good thing but did take the wind out the NAMB predictions of a huge refi year!

I have a 5 year on an investment property that I have let adjust the last 2 times just because it made no sense to touch it. I love all the junk mail and phone calls I get. Refi now to get out of that arm......ahhhh no thanks for now.

On my primary I have a 6 mo MTA i/o that has been a beautiful loan. Took it out in 2004 - I only wish I had taken it out a few years before. The principle reduction I have been able to make has far exceeded a traditional 30 yr fixed

You are correct Mr. Mike - not all ARMs are bad.

Jun 30, 2008 11:58 AM