I fell in love with ARMs again, after a five month hiatus. Hey! It’s Valentine’s Day so I can tell you a love story. This love affair has been going on since I was in my 20s. The sexy allure of adjustable-rate mortgages were replaced by the stability of that old battle-axe, the fixed rate loan. The culprit was the flat yield curve. I dig curves so my eyes popped out of my head when I opened my e-mail this morning.
Adjustable-rate mortgages walked into my life like a wild-eyed, long-haired, bombshell on a Harley, toting a bottle of tequila. Normally, I balance her beauty with the risk she presents but I promise you, she’s a changed woman. This time, she promises to stay put for a ten-year period. Frankly, ten years is plenty of time for me to outlast a few bumps in the economic road; it’s a relationship worth having.
I’m talking about the spread between a 30 year, fixed rate loan and an ARM with a ten-year fixed period. The 30 year mortgage is around 6.0% while the ten-year fixed rate ARM is offered at 5.25%. Ten years is a LONG time, regardless of the economy, so I’m recommending that over the fixed rate loan. Let me illustrate how long ten years is for you. In 1998:
1- Smoking was banned in all California bars and restaurants
2- Mark McGwire broke Roger Maris’ single season home run record
3- The Belfast agreement for peace in Northern Ireland was signed.
4- The Padres were in the World Series.
5- Apple Computer unveiled the iMac
6- Microsoft was convicted of monopoly.
7- Monica Lewinsky redefined the phrase “sexual relations”
8- Google was started.
9- Jesse Ventura was elected Governor of Minnesota
10- The movie Titanic won the Academy Awards.
Do you see where I’m headed with all of this? Ten years is a long time. Forget 30 year fixed rate loans if you think you might move, retire, refinance, or send a kid to college between today and 2018.
The ten year loan at 5.25% (5.51% apr) is just too damned sexy!
Please contact me:
Call me at 858-777-9751
E-mail me at brian (at) californialoanconnection (dot) com
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