Since mortgage rates are predicted to rise, are adjustable-rate mortgages a bad idea right now?

As interest rates are at historically low levels, the best decision is generally to lock in these low rates now. However, there may be some instances where opting for an ARM (adjustable rate mortgage) could save you money. For example, if you plan to move within the fixed rate period of the loan (a 5/1 ARM is fixed for the first 5 years) you could have a lower rate for the first five years. If you do not sell, or are unable to for some reason, before the rate adjustment, and yes rates will be higher in five years, you run the risk of a higher interest rate and higher monthly payment.

In today's interest rate market there is not a big difference between fixed and adjustable rate mortgages. If if you do find an ARM that is significantly lower than a fixed just make sure you can sell the property before it adjusts. Keep in mind that many people had this strategy in 2004 and by 2009 they were underwater and stuck. The best time for an ARM is when rates are high, then you can ride the curve down.

Right now, it's possible to get a 30-year fixed rate loan interest rate (IR) as low as an ARM IR depending upon the lender. Some lenders aren't even offering ARMs. The primary reason to get an ARM is if you don't plan to be living in your current home for an extended period of time. If you think you will be moving in the next 3 to 10 years, an ARM might be the loan for you. Typically, the longer the ARM fixed period (3, 5, 7, or 10 years), the closer its IR will be to a 30-year fixed. There's no telling where IRs will be 3 to 10 years from now. In all likelihood they will be higher, but because an ARM IR is fixed at the initial IR for the fixed period, there is no cause for concern during it. However, after the fixed period, the ARM IR could increase dramatically depending upon what's happening in the financial markets when the ARM adjusts for the first time. All that being said, if you are unsure about what your future holds for you about living in the same home for awhile, a 30-year fixed rate loan is probably best, especially in today's IR environment. Give me a call 16/7, or email me your phone number so I can call you, and I'll be happy to explain more about an ARM loan versus a 30-year fixed. To learn more about me and our mortgage brokerage, click on my picture. When the next page pops up, click on "Website" and you will be redirected to ours. We work exclusively in CA and get loans done fast, normally, in less than 30 days, at low interest rates and costs. Representing 40+ quality lenders that offer more than 1,000 loan programs, we definitely have something for everybody.

No. It depends on your situation. If you're only going to own your home for 2-3 years, it could be a good program for you.

It all depends on your current financial situation. If you are planning on staying in the home long-term, a fixed rate probably makes the most sense since rates are at historic lows and will likely go up from here. However, if you are planning on staying in the home for only 5-7 years and would sell it before you reach the adjustment period, an ARM might make the most sense. Contact a lender licensed in California that can discuss your financial goals with you and make a recommendation. We are a mortgage brokerage located in San Diego and licensed throughout all of California. Feel free to contact up with specific questions.