For my 16-year-old daughter's birthday last month, I turned two of her embroidery projects (new COVID hobby) into decor for her bedroom, as a present to her (a pillow and a wall hanging). She was thrilled! Both of us have been spending time, while hunkering down, working on crafts, bedroom redecorating (in her case) organizing and decluttering (in my case) and repainting (in my case). It isn't surprising that many of us, while stuck inside with only virtual social lives, have turned to DIY projects to improve our homes (and expend creative energy). This article in the New York Times by Ronda Kaysen describes some really interesting and impressive DIY projects completed in the greater New York area. So, whether you are a Northampton area homeowner interested in readying your home for the market, or someone who just wants to put some creative energy into making your home the most comfortable and functional place it can be - this article may be of interest. And, speaking of Northampton Area Homeowners - NOW is a GREAT time to have one of our agents come give you an opinion of market value for your home! It is a buzzing seller's market out there!
Extreme D.I.Y. for Home Decor
Since they have spent so much time at home in the last year, some homeowners have taken craft and design projects to a new level.
Jen Rondeau didn’t set out to turn her laundry room into a psychedelic disco lounge, but now that it looks like one, she’s very pleased with herself.
It all started in early January as demand for the homemade masks she had been selling since last spring dwindled and Ms. Rondeau, an artist and musician, found herself without a creative outlet. So she turned her attention to the gray utilitarian room in the basement of her West Orange, N.J. home.
Over three days, she painted an abstract midcentury design along one wall, a bold mix of red, blues, pinks and oranges. Smitten with the results, she extended the design on the opposite side, set an orange chair in the corner and set up a disco light machine that plays a flashing light sequence in time with whatever music she pumps through her Bluetooth speaker.
“I had a lot of energy that I needed to put into something,” said Ms. Rondeau, 43, who lives in the four-bedroom ranch-style house with her husband, Paul Rondeau, 42, a freelance cinematographer, and their two young sons. Now that the laundry room is painted, “I want to be in there,” she said. “It makes me happy.”
Miss going to the movies? There’s no time like the present to turn the basement into a home theater with a full concession stand. No room for a soaker tub in a tiny bathroom? No matter. Install one in the bedroom instead. Do the children have cabin fever? There’s no time like the present to bring an ice-skating rink to the front yard.
For these homeowners, pandemic do-it-yourself projects have been liberating, tapping unrealized artistic talents, or honing ones they’ve nurtured for years. Their homes have become not just a space they want to occupy, but one they can mold to their creative vision.
Leanne Ford, an interior designer and a star of the HGTV show “Home Again with the Fords,” sees this as a moment for homeowners to relinquish some of their pre-pandemic expectations. What’s the point of a guest room if you have no guests? “We don’t need to decorate how we were living a year ago, we need to decorate for how we’re living now,” she said.
The COVID-19 pandemic has, among other things, created a backlog of home buyers, eager to move out of urban areas, and into more remote towns and cities. Northampton and it's environs is a highly desirable place to live in a *normal* year; but during a pandemic such as this, we are even more popular than ever! With people relegated to spending most of their time at home these days, there is a premium on home ownership in a small town or city such as Northampton, and it's neighboring communities.
We realtors at Maple and Main Realty are seeing houses receive multiple offers, some of them with cash buyers, on houses not only in Northampton, Easthampton and Amherst - but also in Holyoke, the Hilltowns and even farther afield than that! If you have been contemplating listing your home (or land) for sale - we are happy to come give you our opinion of market value, and advise you about all manner of things related to listing your home. It doesn't cost anything to have the initial conversation. In fact, we don't receive any payment (commission) until your house has actually sold! So whether you choose to list your home right away, or you decide to wait until next year -- having the initial conversation with an experienced realtor is a great first step towards making the decision to sell your home. And, once it is listed, we take over to get your house sold! Contact us today to set up an appointment for a comparative market analysis and opinion of market value.
Hello Readers. We are excited to share with you some updates from our new(ish) land listings at Stowe Farm Community in beautiful Colrain, MA! This unique intentional community has something for everyone! Read on, and reach out if you have questions. Link at end of blog post. In the meanwhile, stay healthy and wear your mask!
Stowe Farm Community is a rural cohousing neighborhood nestled in the beautiful hills of Colrain, Massachusetts.
GEESE, LUMBER, GARDENS, PIGS, BORSCHT
Sebastapol goslings helped us through the pandemic. Read our friend Martha's story of how they came into all of our lives and hearts... Goslings
Milling Lumber Locally
Kai (above) is self appointed project manager of the milled lumber. This lumber is from Michael and Betsy's managed woodlot and from the border with our neighbor, Lynn. It was milled using a portable bandsaw sawmill owned and operated by our neighbor, Matt Gancz. The portable sawmill was built by a Menonite craftsman in the Midwest. Read more and see video: local mill
At age 11, Harley was the youngest member of the Massachusetts Chapter of the Lepidopterists' Society. Now she works at the local butterfly conservatory and has created a beautiful butterfly garden in her own backyard at Stowe Farm. Read more: Family in the garden
How to Outsmart the Pigs!
Haynes is always trying to outsmart pigs, this time with some success. The challenge was to provide a continuous source of water, on gravity pressure, that is relatively impervious to pig fascination and abuse. Pigs are strong and curious; they like to rub up against anything new or just anything that has edges. Their curiosity often leads them to get their snouts underneath a new object and try to flip it up, sometimes bending or breaking it. Read more: Outsmarting pigs
Nourishment for mama to be
Nothing is better than nourishing a mama who was eating for two except cooking for the new family! Recipes: Borscht and Dumplings
The pandemic has increased interest in the value of living in community. We have asked Julie Starr, of Maple and Main Realty, to help us manage sales of the building lots. We recommend that you email us first about the community aspects of living at Stowe Farm, then we will connect you with Julie about purchasing a building lot, or give you information about the house for sale.
Hello Friends of Maple and Main Realty! We hope you are finding some silver linings in this surreal moment in history. Time in the garden, clearing out your basement, reading a good book, time with your nuclear family, zoom calls with loved ones, walks with dogs? Real Estate IS still happening, but inventory is limited, since any seller who lives in their house is unlikely to open it to the public at this time. We are still seeing empty houses and new construction coming on the market. Clients are relying more on video tours of homes vs. in person visits - though those, too, can happen! All buyers must wear masks and gloves and showings are staggered so that only one party is in the house at a time.
On another note, since public parks are in MA closed due to the pandemic, people are looking for other ways to get outside. There are numerous conservation areas with walking paths to explore here in Western MA. This article from MassLive highlights a one mile walking path in the Silvio Conti Wildlfe Refuge in Hadley. There is also a link to other areas to explore at the end of the article.
Got cabin fever? Walk this Silvio Conte refuge trail
by Steve Smith
HADLEY — Visitors to the Fort River division of the Silvio O. Conte National Fish and Wildlife Refuge can observe wildlife, get an education in the environment or simply enjoy the trail.
Conte represented Massachusetts’ 1st District for 32 years. An avid sportsman, environmentalist and fisherman, the Pittsfield native introduced the federal legislation that created the refuge to preserve and protect the Connecticut River watershed. The refuge is comprised of nearly 40,000 acres within parts of Massachusetts, Vermont, Connecticut and New Hampshire.The Fort River division of the Conte refuge is named after the body of water that flows through it. Fort River is the longest free-flowing tributary to the Connecticut River in Massachusetts.
It is a one-mile trail with wooden observation decks so visitors can pause and take a front-row seat to nature. It’s accessible. On the difficulty scale of easy to moderate to strenuous to you-need-to-give-up-all-desserts, this trail is a piece of cake. No hills. Wide, smooth paths. No roots to walk over. No tree limbs to block your way.
Before you go to the Fort River or any trail, here are some answers to questions you might have:
Is it safe to go outside?
Yes, as long as you practice social or physical distancing. By now, you know the drill. That means you must maintain at least six feet of distance from anyone you might meet outside.
Really? Won’t there by other people on the trail?
Yes, that’s possible. Maybe even likely. But imagine meeting a bear on the trail. Chances are he’s more afraid of you than you are of him, and he’ll move away. Be alert. If you hear people coming on the trail, move off the trail They’ll likely do the same. So no headphones. And if you see a lot of cars in the parking lot or lots of cars parked alongside the road next to the trail entrance, come back later or another day because the trail is probably too crowded.
Do I need to go by myself?
No. You should be safe with anyone in your immediate family. If you binged watched episodes of Tiger King on television or completed a 1,000-piece jigsaw puzzle with the person during the days leading up to your cabin fever, it’s probably safe to bring them along.
How about Massachusetts state parks? Are they still open?
Massachusetts Gov. Charlie Baker is urging people to stay home as much as possible to avoid person-to-person contact, but he acknowledges individuals and families need to get outside to walk, hike, jog or bike. State parks and other natural resources managed by the state Department of Conservation and Recreation are mostly open and accessible to the public. There is currently no vehicular access to the Quabbin Reservoir. Elsewhere, playgrounds, fitness areas, visitor centers and bathroom facilities are closed, as are coastal beach parking areas. Find the latest updates and restrictions at: mass.gov/orgs/department-of-conservation-recreation
With the warmer climes we have been experiencing, the spring real estate market won't be far off. Local housing prices being what they are, it can be challenging for first-time home buyers, and/or for buyers who don't have a large amount of money to use as a down-payment - to compete in this seller's market. Since you may be competing with other cash buyers, or buyers with more cash to put down -- now is a great time to connect with an experienced buyer's agent to help you navigate the process - including making introductions to experienced mortgage brokers and loan officers. The following article published in the Daily Hampshire Gazette on 2/21/20, discusses the subtleties to seeking an FHA loan - which might be a great option for certain buyers.
Can’t find an affordable FHA-approved home? You have options
By KATE WOOD
Americans took out nearly $150 billion in loans backed by the Federal Housing Administration to buy homes in 2018. Nearly 83% of those FHA borrowers were first-time home buyers, according to the Department of Housing and Urban Development.
It’s unsurprising that FHA loans are especially popular with first-time home buyers, due to more lenient credit score and debt-to-income (DTI) requirements. But with scores of buyers searching for affordable entry-level housing, finding a place to call home can be a struggle.
In pricier markets, even the FHA’s 3.5% down payment option might bust your budget. Houses that have a low asking price but “need TLC” may not pass an FHA appraisal. And in highly competitive markets, it can be difficult to make an offer that gives you an edge on other home buyers.
What’s an FHA buyer to do? Here are three options.
Priced out? Look at FHA-approved condos
If an FHA-approved single-family house would push your budget past its breaking point, consider making your starter home a condo.
As of October 2019, borrowers can get FHA loans for individual condo units without having to worry about whether the entire complex is FHA approved. John Graff, CEO of Los Angeles-based Ashby & Graff Real Estate, said via email that this change should increase the inventory of FHA-approved condos, offering a broader selection of affordable homes.
For example, in Denver, the 2020 FHA loan limit — the maximum loan amount the FHA will guarantee — is $575,000 for a single-family property across most of the metro area. Looking at 2019 data from the Denver Metro Association of Realtors, that’s enough to cover the steep average sale price of $515,149 for a single-family home. But buyers there could save substantially by looking at condos, which have an average sale price of $366,937.
You’ll want to budget for condo homeowner association fees as well as property taxes. But generally, opening up your search to include condos should bring you lower-priced options.
Found a fixer-upper? Get an FHA 203(k) loan
In markets with older housing stock, passing an FHA appraisal could be a bigger obstacle than cost. Listing photos that make a low-priced house look like a charming fixer-upper can conceal major issues, Corning, New York, real estate agent Jennifer M. Baker noted in an email.
An appraiser’s key objective is ensuring the property is a sound investment for your lender. But an FHA appraisal isn’t just about value. To be eligible for an FHA loan, the home must also meet the FHA’s minimum property requirements by being “safe, sound and secure.”
If you see potential in a house that won’t pass an FHA appraisal, an FHA 203(k) loan could help you afford the needed work. It has similar requirements to a regular FHA home loan, but the costs of renovating the property are rolled into the total mortgage amount, which is based on the “as is” appraisal and an estimate of the home’s value once the renovation is complete. Using a 203(k) might mean living in a rental a little bit longer — costs you can include in your new home loan — or in a construction zone. Either way, you’re turning a house into your home.
Facing stiff competition? Be flexible
There are affordable homes out there, but with many buyers competing for them, it’s a seller’s market.
“When a home goes on the market up to about $250,000, we’ll see an actual race to get to that home,” says Michelle Sloan, broker and owner of Re/Max Time near Cincinnati. “We’ve seen up to 10 offers within 24 hours of a property being listed.”
Though you can use strategies to make your offer more attractive — like being flexible on the closing date — you may also be able to find more options by changing your home search criteria.
A short commute may be a high priority, Sloan says, but allowing for a little added drive time could get you more potential properties. If you’re wedded to a particular location — for the schools, maybe — try to whittle down your wish list. Maybe three bedrooms will work instead of four.
An experienced buyer’s agent can help you weigh possible trade-offs, supply insight into your local market and encourage you throughout the process.
You may not get the first home you submit an offer for — or even the fifth — but “keep looking,” Sloan recommends. “There is a home out there for everyone!”
Happy Weekend, Northampton-area friends! For those of you thinking about selling your home, good news! Sales prices in Hampshire, Hampden and Franklin counties are up this year. For those of you looking to buy, it's a good time to connect with a realtor to help you navigate the competitive market. Attached are some recent real estate stats, courtesy of Masslive!
Got $400,000? That’s the median home sale price in 2019
Posted Oct 23, 2019 / MASSLIVE
By State House News Service
The median Massachusetts home sale price over the first nine months of 2019 clocked in at an even $400,000, bolstered by a record-setting month of September.
The Warren Group reported Wednesday that the year-to-date median home sale price rose 3.2 percent compared to the same nine-month period in 2018, but that home sales so far this year are down 1.6 percent. Sales are down this year in 10 of the state’s 13 counties, while prices are up across all counties.
Sale prices through September
Sales were up 1.4 percent in September and the median home sale price last month of $399,000 was up 5 percent over September 2018 and marked a record high.
"The gain in the median price last month was the biggest monthly gain since March and the gain in sales of single-family homes is the first time sales have actually increased since May," Tim Warren, CEO of The Warren Group, said in a statement. "Until the economy hits a bump in the road, the real estate market in Massachusetts should continue to inch its way upwards."
The median condo sale price in September of $375,000 shot up more than 14 percent over last September and also established an all-time high for the month. The higher prices did not discourage buyers as condo sales for the month were up 5.6 percent over September 2018.
"Condos have been a hot commodity in 2019, but a double-digit spike in the median sale price is quite remarkable," Warren said. "In fact, 14.3 percent marked the biggest year-over-year spike for the month of September in 17 years."
Year-to-date condo sales are down 2.3 percent. The median condo sale price this year is $385,000, a 4.3 percent bump compared to the same period in 2018.
The biggest year-to-date home sale declines in 2019 have occurred on the islands of Nantucket (24 percent), Martha's Vineyard (16 percent) and in Suffolk County, which includes Boston (6.5 percent).
The largest increases in median home sale prices so far this year have occurred on Nantucket (9.1 percent), Franklin County (7.8 percent), Bristol County (7.6 percent) and Berkshire County (7.6 percent).
The five counties where the median home sale price this year has registered below $300,000 are Worcester ($290,000), Hampshire ($282,250), Franklin ($220,000), Berkshire ($215,000), and Hampden ($205,000).
One challenge to being a realtor is negotiating commission for the sale of a property with a seller client. That percentage represents our livelihood. It is compensation for the hard work we do; work for which we are ONLY compensated if and when property actually sells. Realtors are always juggling numerous tasks simultaneously. We are scheduling appointments, canceling appointments, attending showings, fielding buyers, compiling information, scheduling photographers and inspections, chasing leads, chasing paperwork, hosting open houses, putting together marketing materials, attending inspections, negotiating deals, recommending attorneys and other practitioners, keeping our clients on track with deadlines, acting as sounding boards, advising and supporting our clients in many ways. We also play the role of go-between. This is a huge and important part of what we do. Buying and selling real estate is high stakes, and can be fraught with emotion. Having an experienced advocate to help you navigate the potential hiccups is important. For many clients, it is invaluable. Having just come off of a spring market in the Northampton area wherein there were numerous FSBO's, I thought this article from Realty Today was important to share with our readers.
Selling a Home Without a Realtor: Know These 4 Risks
An owner may consider selling a home without a realtor. It's called "for sale by owner" (FSBO) or "fizzbo." However, it's not always blue skies and butterflies when deciding to do this; the homeowner has to be cautious with this decision.
Know these 4 main risks in doing FSBO, before you proceed:
1. It May Take Too Much of Your Time
Selling a home is not as simple as it may look like. Yes, marketing can be simply posting your ads online or even asking your friends to promote it to their network of friends. However, you have to do most of the work by yourself like answering inquiries, setting-up appointments, meeting and touring your would-be buyers.
If you are working or you have your own business, you may need to clear some of your appointments to compromise with your client's free time. In essence, this may be quite tiring for you. You may even be risking opportunities in your own work or business by focusing on this.
If you find yourself complaining about too much work, then you might need to rethink if you are willing to do this all the way. This point is just the beginning.
2. Screening of Serious and Qualified Clients
You will have to do the screening of your potential buyers on your own, basing on their commitment and qualifications. Some prospects may appear too excited and committed to buy your home but then bail out in the last minute because of various reasons. They may also have not passed the loan requirements set by the banks. If you fail to assess them well, you risk losing the clients who are more serious and more qualified buyers.
Tip: You must be firm in accepting clients that are pre-approved by the banks, says a 2009 report by CNBC.
3. Not Knowing the Right Value For Your Home
A professional realtor is knowledgeable of the current asking prices and market values of the houses within your area. He could advise you if you are undervaluing your home or asking too much for it.
In 2014, the National Association of Realtor reported that the median price for a home sold with a broker was $215,000, while a house sold without a broker was $174,900, basing from a 2013 Profile of Home Buyers and Sellers study.
Imagine the difference of more thant $40,000! Most buyers think that they would be saving around 5-6 percent for broker's commission if they do it on their own. But basing from this report, if you do FSBO, you are actually not saving. You should be getting around 23 percent more of your asking price.
On the other hand, if you want to sell your house this spring season, asking too much could also increase the risk of not getting any sale at all, says Lynn Findlay, a Realtor with Coldwell Banker Residential Brokerage in Belmont, as reported in Bankrate.
Buyers have also surveyed 10-15 properties before buying, notes an NAR Study. This would mean, buyers are also knowledgeable of the prevailing market prices in your area.
4. Negotiation and Closing Problems
You have to close the sale on your own and with that, create a binding contract between you and the buyer. What if he asks for the furnishing to be included in the deal? What if he likes it in a rent to own style? What if he asks for a discount? A licensed realtor can help you by negotiating for you and he also makes sure that your contract is legally binding and complies with all local regulations, notes Realtor.
You may negotiate and draft your contract without any advice but must face risks of not being able to put important matters in the agreement or be shocked that the buyers find a loophole in your contract.
So, consider all these things first and decide if you will do the FSBO process.
You're driving through Conway, MA and you notice a charming cottage farmhouse with a chartreuse front door and cozy front porch, tucked next to the South River. A plaque near the front door reads "Oldest Home on Main Street", built in 1830. You may feel compelled to honk the bike horn-cum-doorbell announcing your arrival. You will be intrigued by the exterior charm and whimsy - what does the inside look like? Welcome to this incredibly adorable home in Conway. The oldest home, yes, but also fantastically maintained and updated. The current owner has painstakingly cared for this piece of history...Pella windows, kitchen & bath remodeled, Quadra-Fire wood stove (and forced air heat too), metal roof and a new 300 foot well are just some of the updates that have been integrated into this home, while keeping the wide plank wood floors on the main floor and chestnut beams in the second floor family room. A fantastic wood deck overlooks the 1/4 acre lot. This is perfect spot to enjoy the bounty of the gardens, pollinator friendly flower beds and relax to the sounds of the South River. Welcome to 53 Main Street in Conway, Massachusetts. Offered at $275,000. Contact Scott Rebmann or Lisa Darragh for a private showing of this unique and wonderful home
Come check out 21 Hooker Avenue in downtown Northampton, MA! This beautifully updated, move-in ready home with historic charm and modern amenities is set on a quiet cul-de-sac within walking distance to downtown Northampton and one block from the bike trail. The house features a brand-new custom kitchen with energy efficient stainless-steel appliances and large island; a remodeled upstairs bathroom with clawfoot tub and heated tile floor; a first-floor half-bath with laundry; three-season enclosed sun porch; and hardwood floors throughout. The private backyard with brick patio backs up to a city park and features a detached 1-car garage and a bonus space that can be used as a studio, workshop or fitness room. Other updates include insulation, 200 amp electrical, boiler and hot water heater. Zoned for Jackson St. School.
Offered at $399,000. Contact Julie Starr for a private showing, or come to the open house this Saturday, August 24th, from 11-1 pm!
Are you seeking a mortgage and wondering whether an Adjustable Rate Mortage (ARM) might be right for you? The following article from Apartment Therapy outlines three cases wherein an ARM might just make sense, and save you money. If you are seeking a mortgage, that likely means you are working with a local realtor. Any good realtor, such as our group at Maple and Main Realty in Northampton, MA, will be able to direct you to local banks and/or mortgage brokers. A lender or mortgage broker will be able to speak to about which products are best for you, given your particular situation - both financial and otherwise. Read on to see if, perhaps, an ARM might be right for you. However, please be sure to speak with an expert who knows your local market before making any decisions to do so!
3 Times Experts Say Adjustable-Rate Mortgages Make Financial Sense
by BRITTANY ANAS
An overwhelming majority of homebuyers opt for fixed-rate mortgages. The terms of these loans offer all the warm and fuzzy feelings that come with a long-term, stable relationship. Go with a 30-year fixed rate and your mortgage payment next month will be the same as it will be in 2049, which makes budgeting super-duper predictable.
Already popular with many first-time homebuyers, fixed-rate mortgages solidified themselves as the darling of the mortgage industry following the housing crisis. Most people thought adjustable-rate mortgages (ARMs) were just a bad idea. Borrowers turned away from ARMs, fearing that once the rates reset, it could be difficult to keep up with housing payments, and thus put them at risk of foreclosures.
But adjustable-rate mortgages seem to be making a comeback. While they still are risky for a long-term investment, they have more safeguards in place than they did prior to the housing market crash, like how much and how fast a mortgage rate can adjust.
Here’s what the numbers tell us: In May 2019, adjustable-rate mortgages only made up 6.7 percent of new home loans, according to Ellie Mae, a software company that processes more than a third of the mortgages in the United States. But in December 2018, ARMs seemed to be mounting a comeback, making up 9.2 percent of new mortgages—the highest since Ellie Mae began tracking the data in 2011.
The biggest misconception about ARMs? That they should never, ever be used. In fact, there are circumstances when finance and mortgage experts say adjustable-rate mortgages actually make more sense a fixed-rate.
“People should not be afraid of an adjustable-rate loan,” says Melissa Cohn, executive vice president at Family First Funding LLC, based in New York City, who favors seven-year ARMs and has one on her own home. “Historically adjustable rates have always been lower than a 30-year fixed rate and can be a great money saver.”
Recognizing that homebuyers have unique financial situations, we asked mortgage lenders when it makes sense to go with an adjustable-rate mortgage. Here, three situations in which they’d recommend an ARM.
But just a reminder before we delve into the scenarios : It’s a good idea to talk all this over with a home lending advisor, says Shelby McDaniels, channel director for corporate home lending with Chase Home Lending.
“Everyone’s situation is different and there is not a one-size-fits-all loan,” McDaniels says.
1. You’ll move soon
First, an explainer on how ARMs work: The title of the loan lets you know when the interest rate can reset. So, if you get a 5/1 ARM, that 5/1 means the loan’s lower introductory rate will last for five years, and, after that, it’s subject to adjusting on an annual basis, Holden Lewis, NerdWallet‘s home expert explains.
It’s best to get an adjustable-rate mortgage when you feel confident that you will sell the home during the introductory period, or within a year or two of the end of the introductory period, Lewis says.
“So if you get a 5/1 ARM, the safest course is to do so if you expect to sell the home within seven years or so.”
If you’re buying your forever home, you could be subject to ever-increasing interest rates after the introductory period ends—unless you refinance, Lewis says.
Piggybacking on this, if you are buying a starter home and will want to upgrade within five years, an ARM may be a good fit.
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Many people don’t consider their actual circumstances and take a fixed rate without giving thought to an ARM, Cohn says. “If you are a first-time homebuyer, newly married, growing a family—those are all reasons in my eyes to take an ARM as your housing needs will change as you go through life.”
Another great reason? You’re starting your career in an expensive city where rent is consistently going up, but you don’t plan on living there in your next chapter of life. In fact, the mortgage are more popular in high cost metro areas like San Jose, California.
“An interest-only option can make ARMs even more attractive for those who are in higher cost-of-living cities on a temporary basis,” says Lauren Anastasio, Certified Financial Planner at SoFi, a personal finance company. “An interest-only ARM typically results in the lowest possible monthly payment during the fixed-rate period and can be a great way for someone to lock-in their monthly housing cost in a location where rental costs tend to increase each year.”
2. Interest rates are low
Adjustable-rate mortgages are a great option in a low or declining interest rate environment, explains Riley Adams, a CPA and senior financial analyst who runs the personal finance blog Young and the Invested. Typically, ARMs anchor to some publicly-available interest rate benchmark (such as LIBOR, Fed Funds rate, prime rate, etc.) and add a defined number of basis points to the overall rate offered to you under the ARM. If your ARM adjusts way higher than what you were paying, you can refinance to another ARM or a fixed-rate mortgage—whichever option saves you the most money. (Though sometimes refinancing can be out of the question if housing prices drop greatly—one of the problems that happened during the 2008 housing crisis)
“Because we have been in a low-rate environment for an extended period of time and this looks likely to continue, going after this lower interest rate would make economic sense due to the interest cost savings,” Adams says.
On his previous mortgage, which he took out in July 2011, he went with a 30-year fixed rate and regrets the decision.
“Had I opted for the 5/1 ARM, I would have paid considerably less in interest and ended up with a lower rate were I to refinance,” he says.
3. You plan on paying off your mortgage quickly
An ARM could be a good fit if you plan on paying off the mortgage before the rate adjusts, says Kristopher Barros, marketing strategist at Embrace Home Loans in Middleton, Rhode Island.
“That is a less common scenario for a typical homeowner, but still a good reason to take advantage of the lower rates typically associated with an ARM,” Barros says.
A final note: If you are considering an ARM, be sure to comb over the terms of the fixed period. Most common are 3, 5, 7, and 10 year fixed-period ARMs, says Andy Harris, president of Vantage Mortgage Group, Inc. and member of the Association of Independent Mortgage Experts (AIME). Three-year ARMs are less common and more risky with the unknowns, making the longer-term initial fixed-rate period more attractive, he explains. But, the longer the fixed period, the higher the interest rate generally.
Decisions, decisions! (But, again, before deciding, talk to a home lending advisor about your situation, as McDaniels recommends.)