PenFed or Pentagon Federal Credit Union is currently offering an exceptional deal on home mortgages and the good news is you don’t have to work at the Pentagon or even be a member of the military to join PenFed and have access to their great mortgages. The most popular is the 5/5 ARM. Now before you quit reading because your fear of an ARM mortgage, consider this. Currently the rate is somewhere around 3% so let’s say that you refinance with PenFed at the 3% rate. You’re locked in at that rate for the next five years. What is the likelihood that you will move or refinance in the next five years? If you’re like most Americans it is probably pretty high so the first adjustment period probably won’t affect you. Let’s say that you do stay in your home for more than five years. The maximum your rate can adjust up or down is 2% so the highest your rate could go up would be a jump from 3% to 5%. If your rate did increase up to 5% you’re locked in for another five years. If you look at the historical numbers the likelihood of you staying in your home for ten years is very unlikely and even if you did you’re paying 3% interest for the first five years then 5% for the last five and that’s worst case scenario.
So what is your payment going to look like? Well if you’re loan amount is $400,000 you’re looking at a principal and interest payment of $1,686.42 for the first five years and $2147.29 for the next five. The average 30 year fixed mortgage is going to run you around 4% with a monthly principal and interest payment of $1909.66. After reviewing those numbers you might still be leaning on the 30 year fixed because the word “fixed” sounds safe but here’s the kicker. Your closing costs on the standard 30 year fixed mortgage are going to run you somewhere between $12,000 and $16,000 for that size of a loan but he PenFed closing costs are going to run you $0. That’s correct there are no closing costs associated with the PenFed 5/5 mortgage because they pick up the tab for up to $100,000 in closing costs. Why? Probably because PenFed is a not-for-profit credit union owned by its members, either way it is a great deal that will expire before long. The only fee that you would pay is for title insurance and that’s only if you close with someone who is not a PenFed preferred title company. The PenFed 5/5 ARM mortgage is in high demand so be prepared to wait 60 to 90 days before you’ll be able to close but I think it’s well worth the wait. If you know for a fact that you won’t be selling your home for a very long time then maybe this isn’t the right loan for you but for the majority of those out there the PenFed 5/5 ARM can save you several thousands in both interest and in fees.
I find that this loan is great for those who are moving to an area for a short amount of time, say for work purposes, and they know that they’ll be moving after only a few years or for first time home buying couples who have the 20% to put down but know that their family will be growing and they’ll soon have to upgrade to a larger home in a few years.