ARM LOAN INTEREST RATES IN 2018 and 2019 - The Facts

If you took out an ARM loan between 2011 and 2015, you have probably enjoyed a low interest rate and low monthly payment.  Mortgage rates have been at all-time lows for almost 10 years.  However, in 2018 mortgage rates started to rise.  And, the instruments (indices) that determine future ARM rates rose too.   This all but guarantees your ARM interest rate and monthly payment will increase during upcoming initial and annual adjustment periods in 2018, 2019 and beyond. 

Most ARM borrowers are usually unpleasantly surprised when they interest rate and payments adjusts.  WHY?   Because it's not something your current lender is going warn you about and most of these Adjustable Rate Mortgages were opened anywhere from 5-7 years ago. 


FACT 1 YOUR INTEREST AND PAYMENT WILL INCREASE SIGNIFICANTLY AT YOUR FIRST RATE ADJUSTMENT:  Because almost all ARM loans are tied to the LIBOR Rate, Treasury Rate, or Prime Rate, your interest rate is guaranteed to increase in 2018, 2019 and beyond.  And, because of the large increase of all three of these indices in the last two years, you will see at least a 2.00% or higher increase in your interest rate.  A higher interest rate means a higher payment.   If you need a refresher course on how ARM loans work, click HERE. 

FACT 2YOUR WILL EXPERIENCE FUTURE INTEREST AND PAYMENT INCREASES AS YOUR LOAN STARTS ADJUSTING ANNUALLY: Projections are for these indices to rise again in 2019 and beyond .... meaning you will experience future interest rate and payment increases as your loan now adjust annually.  The payment on a $200,000 loan balance will increase $219 at the first rate adjustment and will continue to increase annually by between $80 and $120 (per year), bringing the total payment increase to nearly $400 per month.

FACT 3:  HOPING FACTS 1 AND 2 DON'T APPLY TO YOUR LOAN IS ONLY MAKING IT WORSE:  Trust me, I wish I could tell you that your ARM loan can escape these increases, but the numbers don't lie.  The fact is the mortgage rates, LIBOR Rate, Treasury ARM Rate, and Prime Rate have all risen significantly in the past two years.  

FACT 4:  WAITING UNTIL YOUR INITIAL FIXED RATE EXPIRES IS A BAD PLAN:  The forecasts for mortgage rate and the pricing indices is for continued rises.  The current FIXED and ADJUSTABLE RATE MORTGAGE rates have not yet caught up with the indices increases, so there is a window now to limit interest rate and payment increases.

The purpose of this exercise is not to scare you.  It is to make you aware of the CURRENT ARM interest rate environment and the likelihood for your interest rate (and monthly payment) to continue to rise over the next few years.  To see how the interest rate affects your monthly payment, click HERE.

The key is being pro-activeNow is the time to start examining your options.   

ADVICE IS FREE!:  At Cornerstone Lending, advice is always FREE.  Why not take advantage of our FREE Mortgage Proposals and FREE Automated Appraisal Reports?   Both will allow you to make an educated mortgage decision. 

More than likely, your mortgage is your biggest monthly payment.....don't gamble on future interest rates.