Good Advice for someone in an ARM
by Evan Vanderwey on 19/11/09 at 8:58 pm
Last week I received a call from a new client. I had not written his last loan, but he was referred to me for advice because he is in an ARM mortgage, is facing a layoff from work and wants to make a good decision. This is the email I just fired off to him . . .
Client:
I received your email and have had time to review it.
Your mortgage adjustment letter and your note don’t match up, the letter they sent you gives you results that are better than the note you have from them. Based on your note, your rate should be 3.625% and they are going a full quarter lower than that. ??? In addition to that, they are saying that your “margin” is 2.75% and your note shows it to be 3.0%. That will be slightly beneficial for you in years to come.
You have a couple of options:
1. Try to refinance quickly while you are employed – 5.0 to 5.25% is what you can expect if your credit scores are good – you may qualify for the new “open access” terms that waive the negative results of a low appraisal.
2. Ride this out in the ARM and enjoy the lower rates while they are with us. The Fed just said that they would like to keep rates on ARMs very low for the next 30 months. At the same time though, they said that long term rates would need to rise as a result.
If you said that you would be selling this home in the next 5 years, I’d say, the ARM is not that great a risk -think about sticking with it. If you wanted this to be your “forever home”, then refinance it if you can because long term rates will never be this low again.
Feel free to call me when you can and we can go over details of this. I’ll archive this data and stay in close contact with you as you have questions or concerns.
With respect to payment, if you don’t refinance with us, I’ll bill you as we discussed. That said, if I didn’t get payment from you for a long time, that would be okay (and I’ll never call you for it) I just need to be consistent with clients on the front end.
I trust that the LORD will see you and I through all of our challenges, including the big ones. I know you know this, but even the strongest among us need the reminders.
Best,
Evan
Tony Olds
Nov 20th, 2009
Thanks Evan for sending this out and commenting on this info with ARMs. I am going to schedule an appointment with you after Christmas to discuss in person our options. Thanks again!
Denee` Ellis
Nov 20th, 2009
…”With respect to payment, if you don’t refinance with us, I’ll bill you as we discussed. That said, if I didn’t get payment from you for a long time, that would be okay (and I’ll never call you for it) I just need to be consistent with clients on the front end…”
What does that mean? You charge for advice or did you provide some other service to him you don’t reference.
Just curious.
Evan
Nov 23rd, 2009
Denee, thanks for asking. I do charge for advice as well as provide mortgage services. Sometimes my clients have come to me with cases that quite obviouly will never turn into a mortgage closing, yet they need advice and help navigating through the process. We created a kind of “fee based lending” service for those clients. Many who are currently in an ARM type mortgage (that I did not write) fall into this category. A small retainer to compensate me for my time and expertise makes sure I’m spending my time with those who find it valuable.