If you’re looking to finance a home but find that it exceeds the limit set for traditional mortgages, you might think about considering a 5/1 ARM Jumbo Mortgage. With this type of adjustable rate mortgage loan, you can finance a home that’s over $484,530 (or $727,525 in areas with a higher cost of living).
While this is intended for more expensive real estate, it still provides you with the opportunity to embrace it with a lower interest rate during the first 5 years.
How a 5/1 ARM Jumbo Mortgage Works
These types of mortgage loans are simple in comparison to the other types that could come with a whole bunch of complexities. For the first 5 years of the mortgage, your interest rate will stay the same but after that 5 years, it will change every year. Hence the 5/1 part of its name.
As far as how much it will change, this depends upon the terms and conditions of your mortgage as well as the state of the real estate market among other things. This is often used when financial planning calls for the mortgage to be refinanced before the introductory period ends.
The Benefits of 5/1 ARM Jumbo Mortgage Loans
When evaluating any kind of mortgage, you know that there are risks involved. So the best way to see whether it’s worth taking on, it’s best to see the good side of it.
· Don’t be limited to what the home of your dreams can be.
With loan amounts up to $5,000,000, this is definitely the choice to make for those who need to make a large real estate purchase. After all, that is the purpose of being a jumbo mortgage as it serves those who might not find a traditional mortgage able to suit their needs.
· Lock in your interest rate so it doesn’t change up on you.
For five years, your interest rate will stay the same and so will your mortgage payment, so no need to worry about it changing like variable rate mortgages. Keep in mind that you will want to use this opportunity if you plan on refinancing within the first five years.
· Perfect fit for those who embrace financial planning.
As it was just mentioned, your monthly rate will stay the same and you will know what to expect for the first five years when embracing these types of mortgage loans. If you’ve embraced financial planning to ensure a secure lifestyle, this is a great approach and an easy fit.
If you plan on selling or refinancing within the first 5 years of owning your home, this is an option that’s worth considering. Keep in mind that you will want to play it wisely as you don’t want to give it a chance to hike up the interest rate that you can’t afford after the 5 years is up.