By Elliott Topkins, Esquire
11/3/11
With interest rates at historical lows, and home values slowly on the rise in Milton and elsewhere in the Boston area, there has been a steady flurry of refinancing activity. I work with several lenders who are doing a brisk volume of refinancing transactions, and there seems to be no slowdown in this activity. While I understand that most people are looking for the security of a fixed rate mortgage, I have become more and more convinced that adjustable rate mortgages (usually called “ARMS”) may be appropriate for many people who more or less “knee-jerk” themselves into the fixed rate products. The same kind of thinking can be applied to people who are purchasing a property and need to obtain a mortgage to complete the purchase.

If you will look at current rate structures, ARMs carry an interest rate that is lower than a fixed rate. That being the case, you will have “in your pocket” savings for whatever period you select an ARM over a fixed rate mortgage. For those of you who are looking for protection, most lenders offer hybrid products such as “7/1 ARMs” or “5/1 ARMs.” This means that your mortgage rate is fixed for the time in question and then fluctuates once that period is completed. The writer has had a good experience with this type of loan. I started my mortgage at 6.25 percent in 2003 with a 5/1 ARM. The rate is currently 3.25 percent because interest rates have come down.

ARMs are not for everyone, but I believe that if any of you are in the following positions, you should consider selecting an ARM program:

Your home is a short-range situation. You fully intend to move within a relatively short period of time, either because your home is too large or your home is too small. Select a short term ARM and save some money.

You are on the edge in terms of qualifying for a mortgage. The lower ARM rate may be able to benefit your situation if that is the case.

You are not risk aversive, and you have the necessary reserve funds to handle a spike in interest rates in the future. You want to get the benefit today, and you can handle tomorrow.

My firm, Topkins & Bevans, has experience in counseling people on which mortgage program offers the best advantage. This is a “no-charge” service we offer, and we can refer you to an array of lenders who can serve your needs. This is a great time to improve your mortgage situation or purchase real estate. I urge you to start considering your own, individual, situation and to act now. There may never be a better time to secure the “right” mortgage loan for you and your family.

(Mr. Topkins is an attorney with Topkins & Bevans, Braintree Executive Park, 150 Grossman Dr., Braintree, MA 02184. His blog can be found at http://realtorsresourceblog.com. His telephone number is 617/596-3184 and his e-mail address in etopkins@topbev.com.)