Tuesday, November 22, 2011

Is a 10 Year Adjustable Rate Mortgage Right For You?

Ann Arbor Mortgage rate update:

The week of November 21st

Again this week, rates had minor changes:  The zero point 30 year fixed conventional rate continued to bounce between 4% and 4.125%, spending most of the week at 4%, while the 15 year rate continues to hold at 3.25%.  The FHA/VA 30 year rate still hovers at 3.875%.

Adjustable Rate Mortgage rates in review:  

10/1 ARM reached 3.375%
7/1 ARM reached 2.875%
5/1 ARM reached 2.75%

We continue to recommend that borrowers lock….or cautiously float!

Is an Adjustable Rate Mortgage (ARM) perfect for your situation?   It might be if you intend to be in your home for 10 years or less.  Students who relocate and plan to buy an Ann Arbor home while they complete their degree, internship or residency are perfect candidates for an ARM.  Doctors, nurses, professors and other upwardly mobile professionals should also consider using ARM financing.  

An adjustable rate mortgage offers a lower initial rate and monthly payment than a
conventional fixed rate mortgage. After an initial term, the interest rate on an adjustable
rate mortgage loan is re-set periodically to keep the rate in line with current market
interest rates. For example, a 3/1 ARM loan offers a fixed rate for the first three years;
the interest rate adjusts once a year thereafter. 5/1, 7/1 or 10/1 ARM loans offer a fixed
rate for the first 5, 7 or 10 years respectively, adjusting yearly thereafter.

The lender sets the adjustable interest rate by adding a fixed percentage to an index rate.
When the interest rate goes up, your monthly payment increase; when the interest rate
goes down, your monthly payment decreases.

Most ARM loans have a periodic rate cap and lifetime cap to limit the amount the interest
rate can increase, or decrease, each adjustment period and over the term of the loan.
If the start rate is less than the fully indexed rate, your interest rate and monthly payment
may increase significantly at the first adjustment – even if the index does not change.
An ARM may be the best choice for homeowners who intend to sell their homes within
the first 3 – 10 years.

Citi offer competitive ARM rates and exceptionally low lender fees.  Call for a quote!

Mary Adams
Real Estate Relationship Manager
Citibank, N.A.
Cell:  231.437.0301.

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