Since 2022 rates have climbed and with the Federal Reserve anticipating two more rate hikes in 2023 Americans have seen their monthly payments increase, leading to the return of Adjustable-Rate Mortgages. Though no one has a crystal ball many anticipate rates to lower in the next 18 to 24 months. In 2021, 2% of mortgage applications were for ARMs, while 2022 saw applications at 13% and
remained steady into 2023. Before choosing a mortgage program one should ask themselves the following.
How long do I anticipate on holding this current mortgage?
ARMs come with a fixed rate component for a period followed by a number that indicates how often the rate can adjust. For example, a 5/6 month ARM implies that the rate will be fixed for the first 5 years and then can adjust every 6 months after the fixed period. If you only plan on owning the home for 4 years, then a 5/6 month ARM would be a good choice. ARMs most commonly come with 7 or 10 year fixed portions and be refinanced just like a fixed mortgage giving the same flexibility.
How much money are you able to save by utilizing an adjustable-rate vs. fixed rate?
A $726,200 loan, comparing today’s average 30 Year Fixed Rate of 7.17% vs a 7/6 month ARM of 6.20%
The ARM provides a $467 monthly savings. If we take this $467 and multiply it by 72 months (number of months until the ARM adjusts) one would save $33,624 in the first 7 years. No refinance is going to cost this much.
Aaron Benton, Loan Officer, Movement Mortgage – Mobile 843-268-4814 – aaron.benton@movement.com – www.aibenton.com
