ARM vs FRM

technofy_bank · Joined: 06 Oct 2006 Posts: 4

Hey friends,

What are the unique differences between these two types of loans,which loan is the most popular among these two, recently I gone through an article which summarized that ARM is the most popular among the loan borrowers.

Is that true and if yes then what are the reasons for its popularity.

Good Day.

Mac · Joined: 04 Feb 2005 Posts: 276 Location: Knightdale, NC

In my opinion, the Adjustable Rate Mortgage has a couple of very specific applications.

The first involves people who KNOW they will be moving/selling the home in a certain time frame. The old IBM'rs come to mine. It used to be that IBM only allowed you to stay a maximum of 3 years before they moved you so why pay a fixed rate when you knew you would be heading out soon?

Another involves an ARM as a "credit patch" type of loan. Where the borrower has had credit "issues" in recent past and now understands they cannot treat their credit as they have. They know they are rebounding and will be taking advantage of a fixed rate mortgage in the next year or 2. This can be done successfully if the Loan Officer is very candid with the borrower and they have a real "come to Jesus" meeting about the past credit problems.

Personally I think the Option ARM has been severely abused in it's application.

It is a terrific loan in certain instances and a horrific loan in others. I will probably always consider the Option ARM as a very good loan for commissioned income people. I don't see me going away from that.
I don't like seeing it used for "Joe Everyman" the wage slave who never sees any major changes in income.

darkstar · Joined: 27 Oct 2006 Posts: 58 Location: Hodgenville, KY

3, the ARM allows borrowers to pay a lower rate today as they wait for the market to shift again so they can refi at a fixed lower one...

And Option Arms are totally abused, as will any product the banks come up with...But the OA has made it easy for those with no skills, knowledge or concern for their borrowers future situation sell "1%", real tough huh...

GABullDogg · Joined: 30 Jan 2008 Posts: 4 Location: Lawrenceville, GA

In my situation, I have an adjustable mortgage at 7.8 with a second mortgage attached at 11% which they call a balloon mortgage that I must pay off within five years, if I don't, whatever remaining balance must be paid-in-full. I'm a GM retoree getting a pension monthly. It would be to my advantage to refi to a 30 year fix at the lowest rate possible. 1. My credit needs improving. 2. I'm not sure who to refi with. With my two present loans combined, i'm paying $1100 a month. I'm considering Ditech or Countrywide, but not sure. I know this, my adjustable loan will go about $100 I believe in May.