Is your Adjustable Rate Mortgage (ARM) coming due or know someone that is? Then please pass this information on to them.
As a Mortgage Broker in South Florida (Palm Beach Gardens), I have seen many market trends within the Lending Industry. Right now we are in a correction state of the market and we have seen both the Fix rate products as well as the ARMS coming down in recent months.
When your lock in period is over 2, 3, 5 years or even 10 years down the road the way you can figure your rate out is simple:
LIBOR- 4.41
+Margin- 2.50 (Example only. Please review your Note for your exact Margin)
Final New rate 6.91%
Now please keep in mind, you do have safe guards in place with your current loan. Most of the time you have caps ranging from 2 to 3 point spread. So if you are currently paying 5% your first adjustment may not be higher then 7-8%.
Recently I have noticed many clients calling their current Lender/Investor and asking them what the new rate will become when it goes into adjustment period. With the current Indices relatively low some clients are not seeing a major change in their adjustments. PLEASE DON'T BE FOOLED by this.
Most of todays Adjustable Rate Mortgage's are tied to the LIBOR index. LIBOR is short for London-InterBank-Offered-Rate. While the index today is not that high in can change in an instant. This program can spike very easily and before you know it you can be paying a much higher rate than you anticipated. I am not trying to use scare tactics but please, people must realize with the current financial trends in the United States we can be in for a bumpy ride.
When looking at your payments now and what they will be if you refinance please also take into consideration if you don't see much of a payment change you are buying insurance policy on your Mortgage. Yes, their will be a cost to refinance know matter what any fancy advertising tells you. Last time I checked the State still gets their money and know one works for free. However, when you purchase insurance their is a safety factor as well and you realize you must have car insurance and Health Insurance so why not have insurance in the knowledge of knowing you are safe in your new mortgage. Being proactive with your Adjustable Rate Mortgage is the key. Don't wait until it is to late.
For More Mortgage Advice: Mortgage Advice in South Florida
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Full-Time Mortgage Broker in South FL. Palm Beach County. Specializing in Hard Money / Private Money, Foreign Nationals, Jumbo and Super Jumbo Loans. In addition I work with Today's Premiere Lenders.
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Matthew, I wish you could post this weekiy in every blog, newspaper and any other media for the next 2 years!
I recently spoke to a gentlemen whose monthly payment went from $2700 to $4000. He did not know what he signed (and he takes complete responsibility for this!) and is not in a position credit-wise to refinance. Luckily, he does have assets he can liquidate so he won't lose his home, but he is in the minority. He thought he was taking advantage of a low rate and refinanced from his 30 year fixed to the ARM. But, of course, he did not use the 'saved' money to pay off his credit cards, etc and now he is in a worse place than when he started.
I know there are thousands of people that are going to be negatively affected by their ARMs. Last year proved it and the change of the calendar does not mean the foreclosure tsunami is over.
Matthew- I better go check when mine resets! Thanks for the info. This is great stuff to know. Katerina
Matthew, I had one client a few years ago who wanted a LIBOR loan, I had no clue at the time, but we found them one. They had great credit scores and I had to learn all about them quickly.
Tara, I agree with you we are not done yet with the flood of Foreclosures. You are lucky you have a client who is able to be liquid enough to fix his problem. Thank you for your comment
Katerina, My Pleasure. Just make sure you read the margin
Missy, The loan is not a bad thing. I tell people it is just a tool for people to use. It is how they use it that can get them into trouble.
What I like about you Matt is your desire and ability to explain, rather than a smile, a 'Trust me' and 'Sign here' approach. Looking forward to doing lots of business with you. In order to take advantage of your approach I am going to advise my customers to check with you BEFORE we start looking at the inventory to allow them to understand the Financial part of the purchase, so that when the property in found meeting their wants, it will also match to their financial ability. Thank you for your continued great posts.
Matt,
Nice job in explaining how ARM's work. I really like your point "so why not have insurance in the knowledge of knowing you are safe in your new mortgage. Being proactive with your Adjustable Rate Mortgage is the key. Don't wait until it is to late."...who knows what the index will be when it's time for the rate change. It's important to consider ALL factors and not just the "rate"
Richard, My pleasure. I always believe being upfront is the only way to go.
Cheryl, You are so right I have always told people the rate is just one area of a mortgage.