The 5/1 ARM offers a nice value to home buyers and also provides an increased purchase power as buyers can qualify at the lower rate. It is an FHA mortgage so the qualifications are the exact same as the fixed rate option and can be refinanced into as well. The maximum single family mortgage for our area is $271,050.
The interest rate (3.625% today) will remain fixed for the first 5 years of the loan. Following the 5th year, the rate can adjust, but only a maximum of 1% per year and a maximum of 5% over the life of the loan.
If you are in the market to purchase a home, the 5/1 ARM option is definitely worth the consideration.
Years Rate Average Rate
1-5 3.625% 3.625%
6 4.625% 3.79%
7 5.625% 4.05%
8 6.625% 4.38%
9 7.625% 4.74%
10 8.625% (Rate Max) 5.125%
Here are some payment figures based on a purchase price of $150,000. Under this scenario, the borrower saves $119.08 per month or $7,144.80 during the first 5 years of this loan.
30 Year Fixed
5.0%
$790.65 – Principal & Interest
$187.50 – Property Taxes (Estimate)
$45.83 – Homeowner’s Insurance (Estimate )
$65.90 – Mortgage Insurance
$1,089.88 – Total Payment
5/1 ARM
Payments 1-60 (2010 – 2015)
3.625% – Rates is fixed for the first 5 years of the loan
671.69 – Principal & Interest
$187.50 – Property Taxes (Estimate)
$45.83 – Homeowner’s Insurance (Estimate )
$65.78 – Mortgage Insurance
$970.80 – Total Payment
Payments 61-72 (2016)
4.625%
$745.29 – Principal & Interest
$187.50 – Property Taxes (Estimate)
$45.83 – Homeowner’s Insurance (Estimate )
$58.96 – Mortgage Insurance
$1,037.58 – Total Payment
Payments 73-84 (2017)
5.625%
$818.87 – Principal & Interest
$187.50 – Property Taxes (Estimate)
$45.83 – Homeowner’s Insurance (Estimate )
$57.44 – Mortgage Insurance
$1,109.64 – Total Payment
