An Opportunity for a Lower Interest Rate Today

September 7, 2023 | Buying a Home | By: The Goodhart Group

As of this writing interest rates for conventional loans are around 7.5%, so what can you do to get a lower interest rate? Read on to find out! 

We know everyone likes a 30 year interest rate however there is an opportunity to have a lower rate today. A local community lender, John Marshall Bank, offers a 6 year fixed rate product that has a lower interest rate (than a 30 year fixed rate) and then adjusts after 6 years. The beauty of this plan is that at the 6th year, the rate will lock for another 5 years.This loan product is called an Adjustable Rate Mortgage (ARM). They are offered by many lenders, however a typical ARM, called a 7/1 ARM, adjusts after 7 years and then every year after that. This special 6/5 ARM allows you to pay a lower fixed rate around 6.125% for the first 6 years of your mortgage and then the rate will change every 5 years based on current 5 year US treasury rate at the time plus a 2.5% margin (for example the current 5 year treasury rate is 4.37% + 2.5% = 6.87%). 

Who is this product great for? 

  • Someone who will only be in their home for 5 years.
  • Someone who needs a lower rate now and can refinance if the rates improve.

Why is this product great?

  • Current 30 year fixed rates are high at around 7.5%, and this ARM allows you to have a rate of about 6.125% for the next 6 years. You’d be saving at a rate of around 1.375% per month (versus a conventional 30 year loan), so using the ARM you are saving 1.375% per month X 6 years. That is a large chunk of money over 6 years!  Furthermore, in 6 years you will have paid down principle and gained equity. In our market, values are going to keep increasing so the equity gained will increase. For example, if you paid a $500k loan down to $460 over 6 years you’ve gained equity, but also your home is now worth $540k just by virtue of the market in the DMV. 
  • This 6/5 ARM product remains the same for any home price. 

The Bottom Line:

If you’re looking for a better rate, consider non-conventional options. The 6/5 ARM can be a great option for someone who doesn’t plan to be in their home for longer than 5-6 years, or for someone who needs a lower interest rate now. Don’t forget you can always refinance if rates decrease in the future!


Do you have questions about buying or selling in today’s market? We’d love to help! Let’s chat today. 

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