Pay More Or Less

Pay More Or Less

Paying more for your house payment does not make your home more valuable. It does mean that the mortgage rate may be higher than it has to be.

more or less.png

Even though fixed rates may never again be as low as they are currently, an adjustable rate mortgage may provide the lowest cost of ownership depending on how long a borrower plans to own a home. There are different types of ARMs but the one in this example is a 30 year mortgage with the rate fixed for five years and can adjust every one year after that based on independent indexes.

Another feature of a FHA ARM is the maximum rate change in one period is 1% and the maximum lifetime cap is 5% over the initial rate.

In the example below, the payment on the adjustable is $153.48 lower for the first five years or 60 payments. Another interesting thing is that lower interest rate loans amortize faster than higher interest rate loans. In this example, the ARM has a lower unpaid balance at the end of the first five years by $4,239.

The total savings on the ARM at the end of the first period is $13,477. If a borrower felt confident they would sell the home prior to the breakeven point of 8.5 years, the ARM would produce a lower cost of housing even if the mortgage rate escalated the maximum at each adjustment period.

To help determine whether you pay more or less, consult with a trusted mortgage professional and your real estate agent to learn the advantages and disadvantages of different programs. To try your own comparison, check today’s rates at theFreddie Mac Mortgage Rate Survey and plug your numbers into an ??  Equity Accelerator.

ARM comparison2.png.jpg


Lisa Hayden Headshot
Author:
Phone: 941-730-3102
Dated: April 27th 2015
Views: 1,058
About Lisa: I am a Michigan native but call Sarasota “Home” for the last 8 plus years and have proven to be ...

Property Search









RSS Feed

View our latest blog posts in your RSS reader. Click here to access. RSS

Search Blog

Recent Blogs

Home Prices Rising Into Fall - Looking forward, upward price
Florida Tax Burden 5th Lowest In The US - (The Center Square) – Florida
Health Safety And Peace Of Mind - You can take advantage of all-time
The Sarasota Market Is HOT - CoreLogic Chief Economist, Frank

Saved Properties

This is a list of your favorite properties. We will email you if a property is reduced or leaves the market.

Click 'Save' to add a property to this list.

Register / Login

New & returning visitors please enter your information to login.

By clicking 'register' you are agreeing to our terms of use & giving us expressed written consent to contact you.

Questions? Comments? Complaints?

This message will go directly to the head of our team.

Location & Address

The Exit Realty Group
8728 E. State Road 70
Bradenton, FL
941-584-5821
941-755-6021

Other Locations