CURBOW EFFECT: ARM Loans can be beneficial
"My rate did adjust, but to my surprise it ended up dropping to 3.75%," Watts exclaimed. Six months later his next adjustment was due and according to Watts, "it dropped again, this time to 2.87%." Watts received notification a couple of weeks ago about his next upcoming adjustment date and "my rate is scheduled to drop to 2.75%."
"So why am I sharing this story? Not all ARMs are the demonic and toxic products described by talking heads, congress and regulators," Watts says.
"Over a 6-year period I saved $39,750 in interest, paid down my mortgage $30,000 from the savings and spent the rest to help support the economy."
"It's true an inverted yield curve would have resulted in a much higher rate today and my overall savings would have been reduced. However, inverted yield curves don't last very long," Watts says.
Borrowers should be encouraged to ask the question, "Are ARMs with realistic margins really that toxic?"
Homebuyers should carefully consider their own personal financial situation and discuss their long term goals with an experienced mortgage banker when considering an ARM or any other mortgage product for that matter.
