Why Get An Adjustable​ Rate Mortgage (ARM)?

What’s the longest time-period you’ve ever lived in a home?  Consider Jane and John Doe who are buying a new house with a $200,000 mortgage.  In this example:Expected ownership period is 7 yearsInterest rate / APR on a 30-year fixed rate loan is 4.5%Interest rate / APR on a 7-year adjustable rate mortgage (ARM) is 4%, and the rate is fixed for the first seven yearsAssume the worst-case scenario, and the interest rate / APR on the 7-year ARM goes up to the maximum possible rate of 9% in year 8 As you…Read more

How the Fed Impacts Mortgage Rates

The Federal Reserve Open Market Committee (FOMC) meets at least eight times per year to discuss and vote on US monetary policy. The Fed controls the Fed Funds rate, which is essentially a bank's cost of money. When the Fed increases the Fed Funds rate, short-term interest rates such as the Prime rate and LIBOR go up. These are often used to determine interest rates on adjustable rate mortgages, home equity lines of credit, credit card balances, and business loans. However, interest rates on fixed-rate mortgages are not tied to changes in the…Read more