Triangle Area Real Estate News & Information

I don’t think ARM’s or Reverse mortgage indicate a housing bubble, unlike the this article suggests.

I believe ARM’s are an ideal mortgage product for a significant number of home buyers and reflect the reality of today’s work environment; namely that most 25-45 year old buyers will very likely be moving either as their financial, personal or employment status changes. This is referred to as “playing the odds”.

Statistically speaking there an almost 90% chance that most of my buyers will be moving within the first 5 or 7 years of buying their home, so why would they not want a lower fixed rate for the first 5 or 7 years of their mortgage? The media did an absolutely awful job of reporting the issues with the real estate collapse in 2008-09. The ARM’s they reported on at that time were not conventional adjustable rate mortgages; they were negative amortization loans, where the buyer was paying no principal and not even all of the interest, with each payment they made they literally were falling behind. Interest rates at that time were falling, I myself had an ARM on my primary residence and laughed as the rates dropped down to 2.25%. It was late in 2012 after riding my 5 year ARM for 8.5 years before I refinanced. During that time I saved many tens of thousands of dollars in interest payments.

Now I don’t believe interest rates are likely to drop in the next 5 -7 years but I do believe for many home buyers an ARM can be an excellent product and one that should be discussed with a mortgage professional to see if it might make sense. I’m generally not as excited by reverse mortgages, though again there are individuals that these type mortgages do in fact make sense for. My advice with these is that they should be discussed with an individual’s financial advisor and family members before a decision get’s made.

If you’re thinking of buying or selling real estate in the Chapel Hill, Durham, Cary or surrounding areas of North Carolina, feel free to contact me with any questions you may have about the market.