ARMs Lose Appeal

Mortgages linked to Prime (linked to the Fed Fund Rate) are increasing, but 30-year fixed mortgages today are about .5% higher than they were last year this time. Interesting, yes? As a result, the ARMs are not the deal they were last year and the fixed rate mortgages are looking better. It is now difficult (but not impossible) to find an adjustable rate lower than the fixed rates today.

Which brings me to a thought -- perhaps it is time to renegotiate your ARM and move into a fixed rate mortgage. Maybe even clear up any expensive (like credit card) debt that is dragging you down. This can be a smart move -- as long as you don't end up with the same amount of credit card or other expensive debt within a few months.

I've been looking at a few discussion boards lately, where people are debating what's happening in the market. There are still many who are bullish on the housing market and are currently negotiating mortgages. After all, if you can hold your property long enough, virtually everyone makes money! That can't be said for stocks, which may do well over the long haul but can also crash and burn. I've got stock from an IPO of a tech company a few years ago that isn't worth the paper it's printed on. (No kidding either -- the stock currently has a trade value of 0, as in zero dollars! I'm hoping the company will offer me something for it...)

Which brings me to another thought -- as the weather warms, so does the real estate market in general. If you are thinking of buying, you might want to get a fixed rate mortgage rather than an ARM, or get an ARM with a longer fixed rate term. Don't get a really long term in either case -- 5 years or less. We will hopefully see some pressure down on interest rates in the next few years, and an ARM could become your best bet again, so leave your options as open as you can.

Michael

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