California: Lowest 5/1 ARM Mortgage Rates – 3.25% APR

January 3, 2011 No Comments »

If you’re a resident of California and are in the market for an adjustable rate mortgage (more specifically a 5/1 ARM) you have a few options, from both local credit unions and large national institutions, who are offering fairly noteworthy interest rates on these products.

What is a 5/1 ARM mortgage?

A 5/1 Adjustable Rate Mortgage (ARM) is a fixed rate mortgage in which the rate is only fixed for the first 5 years. Then in the second year the the loan becomes an ARM. The new rate is determined by a combination of economic factors and indexes. The indexes used are usually treasury or treasury average index or by the one-year London Interbank Offered Rate (“LIBOR”), and is added to a pre-determined margin (generally between 2.25-3.0%) to arrive at your new monthly rate. The loan is fully amortized (paid off) in 30 years if the payment schedule is followed.

Potential Disadvantages of a 5/1 ARM:

Because these particular products are at their best when real estate prices are healthy and thriving, they may carry some disadvantages in an unfavorable real estate market. You’ll also be better off locking in a 5/1 ARM during a period of high mortgage rates so that you can turn around and refinance after a relativley short period of time.

Best 5/1 ARM Mortgage Rates in California:

(Rates accurate as of January, 2011)

- Bank of America (Yucca Valley, California) has a 5/1 ARM with an interest rate of 3.625% with 1.125 points and 20% down.

- Bank of America (Sacramento, California) has a 5/1 ARM with an interest rate of 3.625% with 1.125 points and 20% down.

- United Security Bank (Caruthers, California) has a 5/1 ARM with an interest rate of 3.625% with 1.125 points and 20% down.

- US Bank (Chino Hills, California) has a 5/1 ARM with an interest rate of 3.625% with 1.125 points and 20% down.

- Wells Fargo (Grass Valley, California) has a 5/1 ARM with an interest rate of 3.250% with 0.75 points and 20% down and a 1% origination fee.

Related: Wells Fargo’s mortgages rates in Illinois are also significantly under the national average.

If you live in California and know of a better 5/1 ARM mortgage offered through your local bank or credit union, please share by leaving a comment!

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