Mortgage Loan Types

Good afternoon, Zingers! Welcome to our brand spankin’ new blog and our first installment of Watch-It Wednesday – ZING Edition! It’s the same weekly video blog you came to know and love on Quicken Loans Mortgage News! We receive a lot of questions about the types of adjustable rate mortgages we offer so we went to Quicken Loans President, Jay Farner, for some answers.

Not only does Jay provide valuable insight into the types of adjustable rate mortgages that Quicken Loans offers, but he also debunks some of the myths surrounding this mortgage. It turns out that ARMs are actually more popular than you may think. Take it away, Jay:

Video Transcription:

Hi, I’m Jay Farner – President of Quicken Loans, and I’m here today to tell you about a mortgage that’s a great option for many people. It’s called an adjustable rate mortgage, or an ARM, and I’ve had an ARM on my home for years. Now, that might surprise you. In fact, I’ve talked to many clients who initially have a concern when we begin discussing an adjustable rate mortgage. They’re not sure if it’s safe, or if it’s the right loan for their situation. So you might wonder, why would I choose an ARM? You might be even more surprised to hear that our CEO has an ARM on his home. Our Chief Economist has an ARM on his home. And several of our regional vice presidents utilize an adjustable rate mortgage for their home financing. You know the real question is “Why?”

Now here’s the good news. The answer is simple. An ARM was the best choice for us, and it might be the best choice for you. One of the best things about an ARM is that in most cases, they have a lower interest rate, and lower interest rates mean lower monthly payments which puts more money back in your pocket.

Let’s take a look at an example. If you had a $200, 000 loan, you might refinance today to a 30-year fixed rate mortgage at 5.25% (APR 5.534%). Your monthly payment would be $1, 104. Now, if you were to get a 7-year adjustable rate mortgage at 3.99% (APR 3.638%) your monthly payment would be as low as $953 for the first 7 years, or 84 payments of your loan.

That’s a difference of $151 per month. And over that 7-year period, that adds up to $12, 684. Sound good?

Now, let’s talk about how our ARMs work. Here at Quicken Loans our ARMs start with an initial fixed-rate period, usually 5 or 7 years. The great thing about our adjustable rate mortgages is that they all have a cap on how far they can adjust. Which means that you’re protected. You’ll never seen sudden rate spikes even after the initial fixed rate period.

More importantly, most Americans move or refinance every 4-7 years. Unfortunately, they choose to pay a higher rate for a 30-year fixed rate mortgage for interest rate protection that they’ll never use. Because a lot of folks think that ARMs are exotic mortgages for only risky people. That’s simply not the case. The ARMs that we’re talking about are the types of loans that millions of American’s benefit from each year.

And here’s something you may not know. Many countries such as England and Canada have traditionally only offered ARMs. And in 7 of the past 10 years, ARM interest rates have actually adjusted down in the United States. That’s right – once your fixed rate period is over, there’s a possibility that your interest rate could go up or even drop lower. The point is, the ARM is a great choice for many people and maybe it’s the right choice for you.

We’ll work with you to figure that out. Our mortgage bankers will listen to you, review your financial situation and help you decide what works best for your situation.

I hope this helps you understand your options a bit better. And we’re excited to have you join the over 1, 000, 000 Americans who’ve had an amazing experience with their mortgage here at Quicken Loans. Have a great day.

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