ARMs Are Back

It seems as though everyone (in this case banks and borrowers) have a short memory. Remember all of the talk about the devastating effect of the ARM mortgages? Quietly, they have entered stage left to the mortgage scene.

That’s right, the ARMs that accounted for nearly 70% of mortgages issued during the boom, then practically dried up during 2009 (just 3% in 2009) have crept back to 5% of all mortgages issued and we hear that they will be at 10% come December.

Why you ask would anyone jump into an ARM at this time? Just check the rates. The most common ARM loan currently sits at a 3.5% rate compared to 5% for a 30-year fixed.

Behind the comeback is a simple fact: ARMs are a great bargain right now. The most common ARM loan currently has a rate of 3.5% compared to 5% for a 30-year fixed-rate mortgage.

Temping, huh? You bet but for the right scenario. Anyone who plans on buying then moving in a relatively short period then the ARM makes sense but anyone looking for long term might think twice. Or even thrice.

Anyone using ARMs to play the appreciation flipping game better do their homework otherwise the ARM might end up strangling them.

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