bank rates

Buy Or Refinance With A 5-Year ARM For Just 2.875% With No Points

Amalgamated Bank is offering one of March’s best deals on 5-year adjustable-rate mortgages to borrowers in 10 states and the District of Columbia.
It’s charging borrowers an introductory rate of just 2.875%, with no points and $1,493 in origination fees for purchase or refinance and a 60-day rate lock.

That’s almost half of a percentage point lower than the national average for 5/1 ARMs used to buy a home – 3.32%, with 0.09 points and $921 in fees, according to Bankrate’s latest survey of major lenders.

It’s also nearly two-fifths of a percentage point lower than the national average cost of 5/1 ARMs used for refinancing – 3.24%, with 0.20 points and $938 in fees. 

This introductory rate is almost a full point below what you’d pay for a 30-year fixed-rate mortgage – 3.82% for buyers, with 0.06 points and $967 in fees.

You’ll find this home loan available in California, Connecticut, Delaware, the District of Columbia, Florida, Maryland, New Jersey, New York, North Carolina, Pennsylvania and Virginia. 

Not available where you live? This deal still serves as a great blueprint to follow. Find a deal like this in your part of the country, and you’ll know you’ve found a great one. 
You can get started by searching Bankrate’s database for the best mortgage rates from scores of banks and mortgage companies.

Your principal and interest payments for the first five years would be just $415 per month for every $100,000 borrowed under the introductory rate, or $830 on a $200,000 loan.

You can use this 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 by as much as five percentage points when they reset the first time.

The interest rate caps for this ARM from Amalgamated Bank 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 more than 6 percentage points over the life of the loan.

Although mortgage rates defied all predictions by remaining relatively low for the past few years, 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 4.875% when it first adjusts after five years (not bad), 6.875% at the second adjustment and could max out at 8.875%.
Like most adjustable-rate loans, this option is best for borrowers planning to sell, or at least refinance, before the first adjustment, depending on where rates are at that time.

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 8.875%, your monthly principal and interest payments for this loan would balloon to $796 per month for every $100,000 borrowed, or $1,592 on a $200,000 loan.

Don’t forget to factor insurance, property taxes and association fees into the payment, which can really bump up your monthly cost.

Amalgamated Bank is based in New York City and gets an A+ rating from the Better Business Bureau.
Whether you’re purchasing or refinancing, to qualify for this loan you’ll need to:

  • Have a credit score of at least 740.
  • Be purchasing a single-family residence that you’ll live in.
  • Be applying for a loan that’s $417,000 or less.
  • Have at least a 20% down payment if you’re purchasing a home.
  • Have at least 20% equity in your home if you are refinancing.

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