Consider an ARM with a good mortgage rate plus perks
Third Federal Savings and Loan is offering an intriguing deal on 5-year adjustable-rate mortgages in six states.
It's charging just 3.49% with $495 in lender fees for home loans in Ohio, Florida, Illinois, North Carolina, New Jersey, and Pennsylvania.
That’s exactly what the average 5-year ARM cost in our most recent weekly survey of major lenders.
But when you factor in the low lender fees, this becomes a better than average deal.
And here's the kicker: Any time during the first five years of the loan you can pay $495 and relock your mortgage rate for another five years.
Your new relock will be prime rate at time you relock it. There is no margin or markup added to the prime rate.
You can take advantage of the relock feature anytime during the first five years when you think the rates may be about to go up.
And you can relock again as many times as you want during the life of the loan -- always at the current prime rate and always for the same $495 fee.
Your principal and interest payments for the first five years of this loan would be just $449 a month for every $100,000 you borrowed.
You can use our adjustable-rate mortgage calculator to determine the monthly payments for the exact terms you are considering.
It will also provide a month-by-month amortization schedule that shows how much you've reduced your debt and how much you still owe if you want to pay the loan off.
Some lenders offer ARMs with lower rates. But check their interest rate caps before you sign up.
The rates on some bargain-basement loans can go up as much as five percentage points when they reset for the first time.
This Third Federal ARM won't do that. Its interest rate caps are 2/2/6, which means it can't go up more than two percentage points the first time it adjusts in five years or two percentage points each year after, and can never go up more than six percentage points.
Of course, this kind of loan makes the most sense if you plan to sell the home before the mortgage resets.
But just in case you don't, choose an ARM you can still afford after five years when the rates adjust.
Interest rates are at historic lows, and you have to assume they'll be higher a few years from now.
Third Federal (thirdfederal.com) is a savings and loan association, whose holding company TFS Financial Corporation is based in Cleveland, Ohio.
Mortgage rates at Third Federal are not geared to specific credit scores. You should speak with a loan office to see if you qualify. But you must be applying for a conforming loan of $417,000 or less.
One final little goodie: You won’t have to pay private mortgage insurance if you put at least 15% down on a home you’re buying, or have 15% equity in a home you’re refinancing. Most lenders require 20% to avoid PMI.
Use our database to compare this deal with the best mortgage rates from scores of other lenders in your area.