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Actually, an ARM is still a good product, depending on one's circumstances. Let's say you buy, planning to stay in a home 7-10 years. A 2/5, 3/5, or 5/5 ARM is great (especially if they can only adjust by a max of 2 points each time) because you will pay much lower interest than you would on a fixed-rate loan, but only experience one change in rate before you sell.
ARM brings RE within reach for some. It makes inflated RE prices seem affordable. A movement of a few points on an inflated asset price would not be pretty, especially when higher interest rates dampen the job market.
SECU is the Walmart of financial institutions. Clearly. I go to neither.
That's a HORRIBLE analogy. SECU is the little mom-n-pop store that Wal-Mart put out of business. Bank of America might be Wal-Mart.
Our mortgage is through SECU. I haven't chimed in on this because we bought way before the bubble and I'm not sure that our experience is very relevant anymore. We have an older home not far from downtown Chapel Hill, 5 bedrooms, 3 baths, a little more than half an acre, walkable to park, pool, bookstore, coffee shop, restaurants, etc, and our mortgage payment is under $1000/mo. I have no problems at all with NC SECU's handling of our mortgage.
ARM brings RE within reach for some. It makes inflated RE prices seem affordable. A movement of a few points on an inflated asset price would not be pretty, especially when higher interest rates dampen the job market.
But, if you're only going to be in a house for 5-7 years, it makes absolutely no difference, does it? All you want to do is pay the lowest interest rate.
We have a fixed rate mortgage with a very good rate, but we've considered switching to an ARM because the rates are dramatically lower and we can refi if we see the rates going up more than we'd like.
I don't think anyone should take an ARM to qualify for more house. But, taking an ARM to pay less interest is a smart move if you know you'll sell within a given time AND you know you can afford the first adjustment to your rate.
For example, our CU (we have SECU, but our mortgage is with our other CU, Navy Federal) has an ARM that only adjusts once every 5 years, and then, it cannot adjust more than 2 points. Right now, their rates are around 2.5 percent on a 5/5 Jumbo ARM. That's a good enough amount lower than our interest rate that we could save a good chunk of money (since we only bought a year and half ago and are mostly paying interest now) if we refi to the ARM and we already know that if it went up a full 2 pts to 4.5 in 5 years, we would still be able to afford the payments.
See what I'm saying here?
We love our house, but within 10 years we might want to build a custom home on a much larger lot. We're still weighing that possibility.
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That's a HORRIBLE analogy. SECU is the little mom-n-pop store that Wal-Mart put out of business. Bank of America might be Wal-Mart.
Our mortgage is through SECU. I haven't chimed in on this because we bought way before the bubble and I'm not sure that our experience is very relevant anymore. We have an older home not far from downtown Chapel Hill, 5 bedrooms, 3 baths, a little more than half an acre, walkable to park, pool, bookstore, coffee shop, restaurants, etc, and our mortgage payment is under $1000/mo. I have no problems at all with NC SECU's handling of our mortgage.
Agreed. We would've gone with SECU if we didn't have better products available through Navy Federal.
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As a credit union, SECU is owned by the members, who decide on the policies by electing the BoD. As they note on the website "Members are, after all, borrowing their own money and that of their friends."
AND you know you can afford the first adjustment to your rate.
OP expects bank to say how much she/ he can be comfortable paying each month. If one needs the bank to say how much he/ she can afford today, chances are the person has no idea what is affordable in the future. Besides, not everyone has a handle on the future. ARM remains a riskier financing vehicle and not for nothing did it earn notoriety for recent events.
I am really sorry you felt being asked a sensible question put you off. You should have done your homework, and based on some basic research and a unique understanding of your situation that only you can have, your entry to the bank should have been accompanied by greater personal responsibility and knowledge. A good banker can guide you but you can't abdicate what is expected of you. Instead of complaining about the bank, I wish your post was more about educating yourself and being a responsible borrower.
Too many people went with the banks' guidances leading up to the massive economic disruption in the recent past. But I guess for some, the recent chapter in the school of life has become ancient folklore with no lessons to be learned.
I am surprised you are considering an ARM product. We are in a low interest period. If you think an adjustable rate will adjust in your favor when interest rates start to rise, you are in for a surprise not unlike those who played a role in the last financial crisis.
I would seriously hope you are an isolated case and that most triangle residential properties are bought with less risky mortgage products.
Wow, pump your brakes buddy...
1. I didn't post this here to bash NCSECU. If you'd read my initial post in its entirety, you'd realize my wife and I are quite happy with our current SECU accounts, and have been for some time now. I was simply looking for constructive advice for the first-time home buying process.
2. We're not considering an ARM product, and was simply mentioning the fact that SECU offers these products, and that they were somewhat "pushed" on us when we met with them earlier this month. Again, reading a post in its entirety before responding usually clears these discrepancies up.
3. Please don't scapegoat my wife and I for the greater cause of your "idiot's guide to home buying" crusade.
Why not? If you are only going to be in the home for a few years, an ARM could offer significant savings. SECU is currently offering a 5 yr ARM at 3.25%. 30 yr mortgages on bankrate are almost a full point higher. Some lenders have 7 yr ARMs as well. They are not for everybody, but I wouldn't rule them out without going through some financial calculations as well as serious thought about how long you are going to be in the home.
Why not? If you are only going to be in the home for a few years, an ARM could offer significant savings. SECU is currently offering a 5 yr ARM at 3.25%. 30 yr mortgages on bankrate are almost a full point higher. Some lenders have 7 yr ARMs as well. They are not for everybody, but I wouldn't rule them out without going through some financial calculations as well as serious thought about how long you are going to be in the home.
I agree. Prudent use of them can be a wise financial strategy.
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