Mortgage Minute

Bonds are rallying and the ten-year bond is now trading at 2.27%, a nice drop for the day. Thanks to yesterday's ECB induced meltdown, fixed mortgage rates have gone up. Thirty-year conforming fixed rates are now at 4.125% with 0 points and a jumbo thirty-year fixed has gone back to 4.00% with no points. When the bond market moves, it is always the fixed rates that get hit first. Yes, everyone tells you that a fixed rate mortgage is a must, but there is a lot to be said for an adjustable rate mortgage. Most importantly, the initial rate on an adjustable is much lower. A ten-year ARM which locks you in for ten-years can be had at 3.125% with no points. On a $400,000 loan, that means a savings of $4000 a year in interest payments. On a $1 million dollar loan, it is $10,000 in saved interest expense. The savings can go a long way and with a five-year adjustable at 2.75%, the savings are even greater and more than make up for the closing costs if you end up having to refinance.