Is the 7-year fixed period ARM the best loan product on the market?
NGG Mortgage
NGG Mortgage CA
Published on March 4, 2018

Is the 7-year fixed period ARM the best loan product on the market?

I believe so. Over 95% of NGG’s client portfolio contains 30yr fixed rate mortgages. So why do I feel the 7-year fixed period ARM is the best product on the market? In comparison, the 7-year fixed period ARM outperforms a 30-year fixed rate mortgage over a (13) year period, even considering the 7-year ARM’s adjustment period. Back up this analysis with facts from the National Association of Realtors, which reveal that the average homeowner keeps their home for only 6-7 years (shorter for first-time homebuyers). In addition, homeowners only keep their mortgage for an average of 3-5 years according to the NAR. I am all about protecting my clients by minimizing risk. Like most of my clients, I don’t like the ARMs from the past, including the 1-year or Negative Amortization loans. The 7-year ARM is far from being a risky loan. I recently did a comparison between a 30-year fixed and a 7-year ARM. The rate on a 7-year ARM was .75% less than the 30-year fixed based on a $320,000.00 loan. After 7-years, the savings favored the 7-year loan vs. the 30-year fixed loan by over $20,000.00. Based on NAR’s statistics on average home ownership and mortgage periods, it’s in my best interest to advise my clients to consider the 7-year mortgage option. What about the adjustment phase? Most of the fixed period ARMs I recommend only have a max initial rate adjustment increase of 2%, with a lifetime rate cap of 5% (on top of initial rate). With that said, even if the rate increased 5% in the first (3) years, the savings from the first 7-years would counter-balance the adjustment increase well into year (13). How many people do you know that have kept their mortgage for (13) years? The averages say unlikely. Most ofmy clients who are buying primary residences will still opt for a 30-year fixed rate mortgage, and I will gladly provide that. I understand the negative history of ARMs, and I know that not knowing what the future entails can prevent people from making a smarter decision that could significantly benefit them.

NGG Mortgage
NGG Mortgage CA
Click to Call or Text:
(619) 762-5626