Better get a big bar of Lifebuoy soap out and cover the children's ears ... I'm going to use an ugly ... dirty ... word!
ARM! See? Told you it was going to be filthy!
ARM ... As in Adjustable-Rate Mortgage ... is probably one of the biggest, ugliest, and most dirty words in real estate over the last 4 to 6 years.
But, I'm here to tell you ... saying and using this word can be GOOD! Keep an open mind now when I say this ... but it's not the ARM program itself that is so evil.
It was how the program was utilized at times during those years that have made the word and program so detested and feared now. As with almost anything, if used improperly or for the wrong reasons ... bad things can be the result. With ARMs, that was definitely the case.
But, below is a clear-cut example of where keeping an open mind ... and utilization of an ARM proved extremely beneficial monetarily to RECENT clients of mine. Circumstances may exist where it could prove helpful to you or others as well. The points that determined the lending program they decided upon were these:
- During the thorough discussion of their mortgage/financial options and a review of their future plans, I discovered that my clients were positive that their new home purchase was going to be of a short duration. The purchase they were making was not to be long term ... and definitely shorter than 5 years.
- At the time of our discussion, the fixed rate was a full percent higher than the rate for a 5-year ARM. (Other ARM and Fixed Rate loan terms and loan programs exist. Make sure you ask/discuss them.)
- At the amount my clients' were borrowing ($260,000), the savings realized when borrowing and utilizing an ARM was over $150 per month.
- That savings per month equates to $1,800+ per year ... and $9,000 in savings over the life of the 5-year ARM.
- These clients were also able to qualify for and claim the $6,500 step-up home buyer tax credit.
Upon the advice of their agent, these clients immediately placed the sales price of the townhome they were selling at a reasonable amount where it "could sell". It did ... just as their agent knew it would. And because they listened and acted upon their professional agent's and lender' advice ... they were able to take advantage of great monetary benefits.
$150 Savings per Month! A Quick and Efficient Sale! $6,500 in Tax Credit Benefit! Thousands in Savings Over the Life of Their ARM Loan! An ARM Loan brought the "muscle" to this transaction that these clients needed.
And they didn't even have to put soap in their mouth!
The point I want to make here is ...
LISTEN to the professionals involved in your transaction. Hold discussions with them. Heed and consider their advice. Keep an open mind. Remember, what didn't work well for someone else, may be the best answer and option for YOU! Weigh all your options. Then ... move forward with your educated decision.