Buy or refi with a 5-year ARM for just 2.45%
Third Federal Savings and Loan is offering one of spring's best deals on 5-year adjustable-rate mortgages.
It's charging borrowers an introductory rate of just 2.45% with no points, $1,758 in fees and a 60-day rate lock.
This rate from Third Federal is nearly two-thirds of a percentage point less than the average cost of a 5-year ARM — 3.11%, according to our most recent survey of major lenders.
Third Federal also offers a lowest rate guarantee. It will beat the lowest advertised rate on a comparable loan or pay you $1,000.
Where it's available
This deal is available for purchases in Florida, Kentucky, Maryland, New Jersey, North Carolina, Ohio, Pennsylvania and Virginia.
If you're refinancing, it's available in California, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Kentucky, Maryland, Massachusetts, Missouri, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Tennessee, Virginia, Washington and Washington, D.C.
Not available in your state? This deal still provides a great blueprint to follow. Find a similar deal from a lender in your area, and you know you've found a winner.
You can get started by searching the best mortgage rates from scores of lenders in your area.
Monthly payments on this 5-year ARM
The principal and interest payments for the first five years of this loan would be just $392.53 per month for every $100,000 borrowed under the introductory rate.
You can use our adjustable-rate mortgage calculator to determine the monthly payment for the exact amount you want to borrow with this or any home loan.
It will also provide a month-by-month amortization schedule that shows how much you've reduced your debt, how much you still owe if you want to pay off the loan and where your maximum monthly payment could end up.
There's a chance that you'll find lenders offering ARMs with lower rates, but it's important to check their interest rate caps before you sign up.
Rates on some of these loans can increase as much as five percentage points when they reset the first time.
The interest rate caps for this ARM from Third Federal won't do that. They are 2/2/6, which means the interest rate can't go up more than:
- 2 percentage points the first time it adjusts in five years.
- 2 percentage points each year after that.
- A total of 6 percentage points over the life of the loan.
This loan also has a rate floor of 2%, meaning that no matter how far interest rates drop, this is the lowest rate you could pay.
Although mortgage rates have defied all predictions and fallen, it's a pretty safe bet that rates will move higher, perhaps substantially higher, by the time this loan first adjusts in five years.
That means your rate could hit 4.45% when it first adjusts after five years (not bad), 6.45% at the second adjustment and max out at 8.45%.
Like most adjustable-rate mortgages, this loan is best for borrowers planning to sell, or at least refinance, before the first adjustment, depending on where rates are at that time. Of course, this loan from Third Federal might allow you to wait until the second adjustment due to the low introductory rate and modest rate cap adjustments.
But it's important to make sure you can still afford the monthly payments if you're stuck with this loan for more than five years.
At 8.45%, your monthly principal and interest payments for this loan would jump up to $766 per month for every $100,000 borrowed, or $1,531 on a $200,000 loan.
And don't forget to factor insurance, property taxes and association fees into the payment, which can really bump up your monthly housing cost.
Third Federal Savings and Loan is based in Cleveland, Ohio, and enjoys an A+ rating from the Better Business Bureau. To qualify for this loan, you'll need to:
- Be applying for a loan under $417,000.
- Have a credit score of at least 740.
- Have at least a 20% down payment if you're purchasing a home.
- Have at least 20% equity in your home if you're refinancing.
- Be using the loan for a single-family home that you'll occupy as your primary residence.
- Sign up for automatic monthly mortgage payments.
Keep in mind that you don’t want to drain your savings and take on mortgage payments that you'll struggle to make every month. Here's how to find the price range that's right for you.