< PreviousSan Antonio has always been known as a big city with a small-town friendly atmosphere. San Antonio’s luxury home market continues to grow at a strong pace with existing homeowners moving up to larger homes and relocating families who are new to the community. San Antonio offers a thriving variety of luxury homes ranging from historical to new cus- tom-built modern homes to high rise condominiums overlooking the Alamo. With a higher sale price also comes a higher loan amount (also called Jumbo Loans when they exceed $510,400). Based on a purchase price of $1,300,000, a typical loan amount would be based on a 20% to 25% down payment for a loan amount of $1,040,000 to $975,000. Like all buyers, luxury home buyers are interested in the funds to close, interest rate and the monthly payment. Although a 30-year fixed rate jumbo loan provides the security of a long-term fixed rate, most lenders unfortunately do not provide the necessary cost ben- efits analysis with an adjustable rate mortgage or ARM. A long-term fixed rate mortgage for a homeowner who is more than likely going to pay off the mortgage by selling and moving on to another home, would benefit the lender more than it would benefit the homeowner. An ARM when responsibly implemented, can save a tremendous amount of money for a luxury homeowner during the initial fixed rate period. After the initial fixed rate period, ARMs can adjust to a higher rate, thus increasing the homeowner’s monthly payment so it always important to understand the risks. Hybrid ARM’s are the most popular and have an initial fixed rate period followed by an adjustable period which typically have 1 year increments for their remaining 30 year term. The initial fixed rate periods can be 10, 7 and 5 years (other combinations are available depending on the lender). Here is a quick review of the differences between a current 30-year fixed rate of 3.625% vs a 10-1 ARM at 3.125% and based on a purchase price of $1,300,000 with a $1,040,000 mortgage over the first 10 years. 30 Year Fixed Rate 10-1 ARM with a 30 Year Payment Difference Rate3.625%3.1250%0.500% Interest Expense In The First 10 Years $337,969$288,925$49,045 Balance At Year 10$808,817$794,312$14,505 30 Year Fixed Rate – 10-1ARM with a 30 Year Difference Payment Rate- 3.625% - 3.1250% - 0.500% Interest Expense In the First 10 Years $ 337,969 - $288,925 - $49,045 Balance At Year 10 $808, 817 - $794,312 - $14,505 Consider All Options for Home Financing BY MARK DREW 20 ATTORNEY AT LAW MAGAZINE · SAN ANTONIO · VOL. 2 NO. 2Not only is the cost of the interest over $49,000 less for the ARM over the fixed rate but the overall balance is over $14,000 lower as well. It is true that in a worst case situation the benefits of the initial lower ARM rate can be offset if interest rates rise after the initial fixed rate period. In the case of a 10-1 ARM that time period can typically be 3 to 4 years after the rate ad- justs. Keep in mind that ARMS do offer maximum initial rate adjustments, annual adjustments and life- time caps. Your mortgage loan officer can provide a detailed breakdown of each of the ARM parameters. Despite the risk, the benefits of the ARM particularly on luxury home financing can be significant. MARK DREW (NMLS# 595322) IS A VICE PRESIDENT AND PRODUCTION MANAGER FOR AMEGY BANK IN SAN ANTONIO. HE HAS BEEN RECOGNIZED BY THE SAN ANTONIO BUSINESS JOURNAL AS A TOP PRODUCING LOAN OFFICER NEARLY EVERY YEAR SINCE 2003. MARK IS A PAST PRESIDENT OF THE SAN ANTONIO MORTGAGE BANKERS ASSOCIATION AND SERVED ON THE FINANCE COMMITTEE FOR ST. PJ’S CHILDREN’S HOME. HE IS ONE OF THE FEW MORTGAGE OFFICERS PER THE SAN ANTONIO BUSINESS JOURNAL TO FUND OVER 400 TRANSACTIONS IN A SINGLE YEAR. MARK AND HIS TEAM AT AMEGY BANK ENJOY SERVING THEIR CLIENTS WITH THE PURCHASE, CONSTRUCTION AND REFINANCE OF THEIR HOMES. FOR MORE INFORMATION, PLEASE CONTACT MARK AT 10001 REUNION PLACE BLVD, SAN ANTONIO, TEXAS 78216, BY PHONE AT 210-343-4441 OR EMAIL MARK.DREW@AMEGYBANK.COM. The sample information above is for informational purposes only. searching for our next ATTORNEY of the month do you know someone to nominate? Submit nominations at www.AttorneyAtLawMagazine.com/Nominate/Top 10 - Forbes Best Banks Western Alliance Bank specializes in banking for law firms and settlement administrators. We bring you years of expertise in supporting all phases of the settlement process from escrow through distribution with a single point of contact. 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