ARMs outperform fixed-rate mortgage investments

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Remember that fixed rate mortgages are more steady for the long term. If you are buying a property as a long term investment there is nothing better than locking in that low rate for an extended period of time. ARMs may be good if you are planning on holding the property for a short period, like when you are flipping the property.

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To compare the ARM VS Fixed-rate, let’s look at the example. During years one, two, and three, you save $1,836 using the ARM over the fixed-rate mortgage. In year four of the ARM, the fixed-rate mortgage saves you $228. During year five, the fixed-rate mortgage saves you $1,332. Year six, the fixed-rate mortgage saves you $1,800.

Option ARM vs. Fixed Rate Mortgage Overview. There are two main types of mortgages: adjustable rate mortgages (ARMs) and fixed rate mortgages. One type of adjustable rate mortgage is an option ARM. Typically, an option ARM has a low introductory interest rate that is fixed for a short period of time, perhaps one or three months.

 · But it turns out not everyone sees fixed-rate loans as the belle of the ball. Many mortgage experts and financial advisors say an ARM can be the best choice for certain investors due to lower payments and, often, lower closing costs. The average rate on new fixed loans was 4.35 percent in early February, compared to 3.39 percent for a 5/1 ARM that holds the starting rate for five years.

New York Mortgage Trust. including fixed rate ARMs and IOs (interest only), decreased from 52% of equity at the end of Q4 2012 to 34% of equity at the end of Q3 2013. During the same time NYMT’s.

Anworth Mortgage. a fixed-rate mortgage. The increase in refinancing drives up the amortization expense and reduces the net interest income available on adjustable-rate mortgages. Source: ANH.

FHA mortgage insurance premiums won’t be going down in 2015 An FHA loan is a mortgage that’s insured by the Federal Housing Administration (FHA). They are popular especially among first time home buyers because they allow down payments of 3.5% for credit scores of 580+. However, borrowers must pay mortgage insurance premiums, which protects the lender if a borrower defaults.

Use this calculator to compare a fixed-rate mortgage to two types of ARMs, a Fully Amortizing ARM and an Interest Only ARM. A fixed-rate mortgage has the same payment for the entire term of the loan. An adjustable rate mortgage (ARM) has a rate that can change, causing your monthly payment to increase or decrease.

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