Advertiser Disclosure

Mortgage

2019 FHA Loan Limits in Connecticut

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Intro

Connecticut, the third-smallest state in size after Rhode Island and Delaware, has nearly 3.6 million residents, 67% of whom are homeowners. The most expensive housing market in the state includes towns near New York City such as Greenwich, Bridgeport and Stamford. The rest of the state has a mix of small towns and cities with more affordable housing, including New Haven, New London and Hartford, the state capital.

Connecticut’s average sales price for homes was $276,109 in 2018, a decline of 4.19% compared with the average sales price there in 2017 — the steepest decline of any state in the New England region that year, according to a market report from real estate brokerage RE/MAX INTEGRA, New England.

For some homebuyers, a Federal Housing Administration (FHA) loan, which has low down- payment requirements and lower minimum credit-score requirements, is a good way to finance a home. In addition, FHA loans allow sellers to pay some closing costs.

FHA loan limits in Connecticut range from $314,827 in most counties, which is the national limit for low-cost housing markets, to $601,450 in Fairfield County near New York City.
Just 1.04% of all the FHA loans in the country were made in Connecticut in 2018, according to HUD. There were 12,754 FHA loans endorsed in Connecticut in 2016, the most recent year for which this data is available, with a total volume of $2.6 billion.

Connecticut FHA Loan Limits by County

County NameOne-FamilyTwo-FamilyThree-FamilyFour-FamilyMedian Sale Price
FAIRFIELD$601,450$769,950$930,700$1,156,650$471,000
HARTFORD$353,050$451,950$546,300$678,950$274,000
LITCHFIELD$357,650$457,850$553,450$687,800$240,000
MIDDLESEX$353,050$451,950$546,300$678,950$274,000
NEW HAVEN$314,827$403,125$487,250$605,525$245,000
NEW LONDON$314,827$403,125$487,250$605,525$240,000
TOLLAND$353,050$451,950$546,300$678,950$274,000
WINDHAM$327,750$419,550$507,150$630,300$285,000
What Mortgage Amount Do you Need?
Calculate Payment Secured

on LendingTree’s secure website

How are FHA loan limits determined?

FHA loan limits refer to the maximum amount any homebuyer can qualify to borrow. Your maximum home price depends on the money you have available for a down payment and the amount a lender will approve for you.

FHA loan limits are set in response to the conforming loan limits established by Fannie Mae and Freddie Mac. The lowest FHA loan limit, also known as the “floor,” is 65% of the Fannie Mae and Freddie Mac loan limit. In 2019, the floor is $314,827 for a single-family home. In high-cost U.S. housing markets, the limit is $726,525, and in some exceptional markets such as Hawaii, Guam, the Virgin Islands and Alaska, the FHA limit for a single-family home is $1,089,787. Limits are higher for two-, three- and four-unit residences.

Do you qualify for an FHA loan in Connecticut?

FHA loans are popular with homebuyers because of their low down-payment requirement of 3.5% of the purchase price and their lower minimum credit score requirements. On the other hand, FHA loans typically have higher mortgage insurance costs than conventional loans.

Comparing all your loan options can help you choose the best financial tool for your home purchase. To find out more about qualifying for an FHA loan, see Magnify Money’s guide to FHA loans.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Michele Lerner
Michele Lerner |

Michele Lerner is a writer at MagnifyMoney. You can email Michele here

Compare Mortgage Loan Offers for Free

Home Purchase Quotes

Home Refinance Quotes

(It only takes 3 minutes!)

NMLS #1136 Terms & Conditions Apply

Advertiser Disclosure

Mortgage

Connecticut First-Time Homebuyer Programs

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Connecticut has something for everyone: proximity to New York City, charming villages, mid-sized cities, beach communities, college towns and historic tourist attractions.If you want to set down roots in the Constitution State, know that there are several programs available for first-time homebuyers. Some programs are also available for first-time homebuyers who want to buy a two- to four-unit building. State and local agencies offer down payment assistance, closing cost help and homebuyer education.

We researched first-time homebuyer programs and their eligibility requirements in January 2019.

Connecticut first-time homebuyer programs

The Connecticut Housing Finance Agency (CHFA) and the Housing Development Fund (HDF) administer different programs designed to help first-time homebuyers finance their purchase. Some programs are limited by household income or have purchase price limits. Others are limited to specific locations.

Eligibility for Connecticut assistance

Homebuyer assistance programs in Connecticut typically require three common elements:

  1. You must be a Connecticut resident.
  2. You must be a first-time homebuyer, which means you have not owned a home in the past three years. An exception may be made if you are buying in an area targeted for economic development.
  3. The home you purchase must be your primary residence, not an investment property or a vacation home.
What Mortgage Amount Do you Need?
Calculate Payment Secured

on LendingTree’s secure website

HFA Advantage and HFA Preferred Loans

The HFA Advantage and HFA Preferred Loans have lower mortgage insurance premiums than standard conventional loans.

Features

  • No upfront mortgage insurance required
  • Lower monthly mortgage insurance costs
  • Mortgage insurance not required when 20% home equity is reached
  • Borrowers who purchase in a targeted area may pay an interest rate that is 0.25% below the standard rate, and unless they plan to apply for down payment assistance, their income eligibility limits are waived.
  • In rare cases, you might be required to pay a Federal Recapture Tax. CHFA may reimburse you for these taxes, which could be incurred if you sell your home for a profit within nine years and your income at that time exceeds Federal Recapture Tax Income.

Eligibility

To be eligible, you must

  • Take a homebuyer education class
  • Meet income restrictions, which vary by location
  • Meet home price limits, which vary by location
  • If you want to buy a two- to four-unit house, you’ll need to apply for the Preferred loan, not the Advantage loan

How it works

To get started, visit the CHFA resource map for the town or city where you want to buy a home.Once you have determined that you are income-eligible and you are aware of the home price limits, you’ll need to contact an approved lender on the CHFA list of approved lenders for Advantage loans and Preferred loans.

You can also sign up for a homebuyer education class, since you’ll need to take that before you complete the homebuying process.

Learn more

CHFA Down Payment Assistance Program loan

The Down Payment Assistance Program loan, available to borrowers who qualify for an HFA Advantage or Preferred loan, is a second mortgage to provide down payment funds for first-time buyers who can afford the monthly payments to buy a home but lack savings for a down payment.

Features

  • Down payment funds in the form of a loan for at least $3,000 up to the minimum down payment required by your loan program, typically 3% or 3.5% of the home price.
  • The mortgage rate is typically the same as your first mortgage.

Eligibility

In order to qualify, you’ll have to

  • Meet the requirements of the CHFA loan program
  • Document your ability to handle the monthly payments to repay both your first and second mortgages.
  • Contribute any savings you have above $10,000, excluding any retirement savings.
  • Pay a $200 application fee.

How it works

You will apply for the down payment assistance loan with the same lender you use to apply for your HFA Advantage or Preferred mortgage. You can also sign up for a homebuyer education class, since you’ll need to take that before you complete the homebuying process.

Learn more

CHFA FHA 203(k) Renovation Mortgage

The CHFA FHA 203(k) Renovation loan program allows you to finance the cost of limited or full renovations of a property you want to buy with a below-market-rate mortgage. The program can also be used to purchase and renovate an abandoned house or a foreclosure.

Features

  • Below-market interest rates.
  • Ability to finance home improvements into your mortgage.
  • Can be used for a single-family home, an FHA-approved condominium and a two- to four-unit building.
  • FHA mortgage insurance is required.
  • Funds for home repairs will be held in a separate account by your lender and disbursed to the contractor. If there are funds left over after the renovation, they will be applied to your principal balance.
  • If you purchase in an area targeted for economic development, your interest rate will be reduced by 0.25% and the income limit will be waived.

Eligibility

  • In addition to meeting the CHFA loan requirements, including home price limits and income limits, the total cost of your finished home must be at or below FHA limits for your area. FHA limits vary by location.
  • You must have a contract for your renovations with a state-licensed general contractor.
  • Renovations up to $35,000 are considered a “limited” FHA 203(k) loan; structural renovations and amounts above $35,000 will be considered a “standard” FHA 203(k) loan.

How it works

To get started, visit the CHFA resource map for the town or city where you want to buy a home.
Once you have determined that you are income-eligible and you are aware of the home price limits, you’ll need to contact an approved lender on the CHFA list for FHA loans. You can also sign up for a homebuyer education class, since you’ll need to take that before you complete the homebuying process.

Learn more

CHFA Military Homeownership Program

The Military Homeownership Program offers low interest loans to members of the military, veterans and eligible surviving partners. Down payment assistance may also be available.

Features

  • Interest rate 0.125% lower than the standard mortgage rate.
  • Down payment assistance is available to qualified borrowers.
  • In some areas, there are exceptions to both the sales price and income limits.
  • Mortgage insurance is required for loans with a down payment of less than 20%.
  • If you purchase a home in a targeted area, the income limits are waived.
  • In rare cases, you might be required to pay a Federal Recapture Tax. CHFA may reimburse you for these taxes, which could be incurred if you sell your home for a profit within nine years and your income at that time exceeds Federal Recapture Tax Income.

Eligibility

  • You must meet requirements of CHFA loans, including income and sales price limits.
  • You must be a veteran; active servicemember; or a surviving spouse, civil union partner or unmarried partner of veterans who died as a result of their military service or a service-related disability.
  • Loan program can be used for a single-family home, an FHA-, VA- or Fannie Mae-approved condo, a two- to four-unit building that has been used as a residence for five years or longer, or for a newly built two-family house if it meets FHA energy-efficiency requirements.

How it works

To get started, visit the CHFA resource map for the town or city where you want to buy a home.
Once you have determined that you are income-eligible and you are aware of the home price limits, you’ll need to contact a CHFA approved lender. You can also sign up for a homebuyer education class, since you’ll need to take that before you complete the homebuying process.

Learn more

CHFA Teachers Mortgage Assistance Program

The Teachers Mortgage Assistance Program provides lower cost mortgages to teachers who teach and buy a home in a state-designated priority or transitional school district, or to teachers who teach in a subject matter shortage area.

Features

  • Interest rate is 0.125% lower than an already below-market mortgage rate.
  • Down payment assistance is available for a low interest second mortgage of at least $3,000.
  • No asset limits are required.
  • If you purchase a home in a targeted area, the income limits are waived.
  • Mortgage insurance is required for loans with a down payment of less than 20%.
  • In rare cases, you might be required to pay a Federal Recapture Tax. CHFA may reimburse you for these taxes, which could be incurred if you sell your home for a profit within nine years and your income at that time exceeded Federal Recapture Tax Income.

Eligibility

  • Teachers must work and a purchase a home in a state-designated priority or transitional school district or teach in a specific subject matter area.
  • Teachers must also meet requirements of CHFA mortgage programs.
  • The loan program is available for single-family homes, condos approved by FHA or Fannie Mae, and two- to four-unit buildings that have been used as a residence for five years or longer.

How it works

To get started, check to see if you work in a state-designed priority or transitional school district or teach a subject on the state list of priorities. Next, contact a CHFA-approved lender. You can apply for down payment assistance with that same lender. You can also sign up for a homebuyer education class, since you’ll need to take that before you complete the homebuying process

Learn more

CHFA Police Mortgage Program

The Police Mortgage Program is designed to help police officers purchase homes in the areas they serve.

Features

  • Interest rate 0.125% lower than an already below-market mortgage rate.
  • Down payment assistance is available for a low interest second mortgage of at least $3,000.
  • No asset limits are required.
  • If you purchase a home in a targeted area, the income limits are waived.
  • Mortgage insurance is required for loans with a down payment of less than 20%.
  • In rare cases, you might be required to pay a Federal Recapture Tax. CHFA may reimburse you for these taxes, which could be incurred if you sell your home for a profit within nine years and your income at that time exceeds Federal Recapture Tax Income.

Eligibility

  • Municipal police officers must buy a home in the city or town where they work.
  • State police officers must buy a home in a participating city.
  • Police officers must also meet requirements of CHFA mortgage programs.
  • The loan program is available for single-family homes, condos approved by FHA or Fannie Mae, and two-to-four unit buildings that have been used as a residence for five years or longer

How it works

To get started, find out if you work in a participating city or town or want to buy a home there. Next, contact a CHFA-approved lender. You can apply for down payment assistance with that same lender. You can also sign up for a homebuyer education class, since you’ll need to take that before you complete the homebuying process.

Learn more

CHFA Home of Your Own Mortgage Program for Disabled Persons

The Home of Your Own Mortgage program provides special loans for households with disabled residents.

Features

  • Low interest loan.
  • Down payment assistance is available for a low interest second mortgage of at least $3,000.
  • If you purchase a home in a targeted area, the income limits are waived.
  • Mortgage insurance is required for loans with a down payment of less than 20%.
  • In rare cases, you might be required to pay a Federal Recapture Tax. CHFA may reimburse you for these taxes, which could be incurred if you sell your home for a profit within nine years and your income at that time exceeded Federal Recapture Tax Income.

Eligibility

  • You must provide proof of your disability or the disability of a family member who will be living in the household.
  • You must also meet requirements of CHFA mortgage programs.
  • The loan program is available for single-family homes, condos approved by FHA or Fannie Mae, and two- to four-unit buildings that have been used as a residence for five years or longer.

How it works

To get started, visit the CHFA resource map for the town or city where you want to buy a home.
Once you have determined that you are income-eligible and you are aware of the home price limits, you’ll need to contact a lender on the CHFA-approved lender list. You can also sign up for a homebuyer education class, since you’ll need to take that before you complete the homebuying process.

Learn more

CHFA Homeownership for Residents of Public Housing

The Homeownership for Residents of Public Housing program is designed to help people make the transition from subsidized rental housing to homeownership.

Features

  • Low interest loan.
  • Down payment assistance is available.
  • if you purchase a home in a targeted area, the income limits are waived.
  • Mortgage insurance is required for loans with a down payment of less than 20%.
  • In rare cases, you might be required to pay a Federal Recapture Tax. CHFA may reimburse you for these taxes, which could be incurred if you sell your home for a profit within nine years and your income at that time exceeded Federal Recapture Tax Income.

Eligibility

  • You must be receiving rental assistance or live in public housing. You may also qualify if you live in a property that is
    • Managed or financed by CHFA or
    • Managed by a local housing authority or
    • Subsidized by HUD.
  • Minimum credit score, income and employment standards will be required by the lender.
  • You must also meet requirements of CHFA mortgage programs.
  • The loan program is available for single-family homes, condos approved by FHA or Fannie Mae, and two- to four-unit buildings that have been used as a residence for five years or longer.

How it works

To get started, visit the CHFA resource map for the town or city where you want to buy a home.
Once you have determined that you are income-eligible and you are aware of the home price limits, you’ll need to contact a lender on the CHFA-approved lender list. You can also sign up for a homebuyer education class, since you’ll need to take that before you complete the homebuying process.

Learn more

CHFA Mobile Home Mortgage Program

The Mobile Home Mortgage Program, administered by the CHFA-approved lender, Capital for Change, is meant to increase affordability for buyers of single- or double-wide manufactured homes.

Features

  • Below-market interest rate mortgage.
  • Low closing costs.
  • Low mortgage payments.
  • Down payment of 20% required — down payment assistance is not available.

Eligibility

  • In addition to the standard CHFA requirements, including income limits and home price limits, you must be purchasing a manufactured home that will be fixed to a permanent foundation in a state-licensed mobile home park.
  • Your home must be a year-round residence.
  • You must sign a renewable yearly lot lease agreement.

How it works

To start, you’ll need to complete a worksheet that establishes that you meet specific criteria. Then you can contact the approved lender for this program, Capital For Change.

Learn more

HDF SmartMove CT program

The Housing Development Fund’s SmartMove loan program offers low interest loans with low down payment options for first-time homebuyers.

Features

  • Low interest mortgage.
  • Down payment options as low as 1%.
  • Down payment assistance in the form of a loan that must be repaid either monthly or deferred and paid when you transfer, sell or refinance the property.
  • You can borrow as much as 20% of the purchase price for down payment costs, but you must contribute any savings you have above $25,000, other than your retirement funds, toward down payment and closing costs.
  • Generally, borrowers should expect to contribute 1% to 3% of the purchase price.

Eligibility

  • Borrowers must meet income limits of 100% or less of area median income by county, which ranges from $86,900 to $111,200.
  • Home must be within the HDF service area.
  • Borrowers must take a homebuyer education class and have one-on-one homebuyer counseling.

How it works

First, determine if your household income fits within HDF’s income limits, which vary by county. Next, contact an approved lender and look into your homebuyer education options.

Learn more

HDF Live Where You Work (LWYW) program

The Housing Development Fund’s Live Where You Work program is designed to make housing more affordable for first-time buyers and to reduce transportation costs and commute time.

Features

  • A 30-year fixed-rate loan with 0% interest for up to $20,000 for down payment and closing costs.
  • You will be required to pay a $750 loan fee.
  • Can be used with other loan programs, such as HDF’s SmartMove CT loan.

Eligibility

In order to qualify you must

  • Have a household income at or below 80% of area median income, which varies by location and household size, from $36,568 to $142,454.
  • Be buying a home in the same town where you work.
  • Take a homebuyer education class and have one-on-one homebuyer counseling.

How it works

First, be sure you intend to buy a home in the same town where you work. Then determine if your household income meets the program’s limits. Next, contact an approved lender and look into your homebuyer education options.

Learn more

National first-time homebuyer programs

As you can see, Connecticut offers a variety of statewide and local first-time homebuyer programs that may help you buy your first property. Whether or not you qualify for these programs, you may also want to look at national programs that could provide a path to homeownership. Check out LendingTree’s national first-time homebuyer guide.

This article contains links to LendingTree, our parent company.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Michele Lerner
Michele Lerner |

Michele Lerner is a writer at MagnifyMoney. You can email Michele here

Compare Mortgage Loan Offers for Free

Home Purchase Quotes

Home Refinance Quotes

(It only takes 3 minutes!)

NMLS #1136 Terms & Conditions Apply

Advertiser Disclosure

Mortgage

What is a 15/15 ARM and Is It Right For You?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Homebuyers and homeowners seeking to refinance a mortgage have varied financial goals. Many borrowers aspire to keeping their monthly housing costs as low as possible for flexibility and room for savings. For some borrowers, the desire for low payments makes an adjustable-rate mortgage, or ARM, appealing because these loans typically have a lower initial interest rate than fixed-rate loans.ARMs are loans with interest rates that can change, as opposed to fixed-rate mortgages. Approximately 8.9% of all closed loans in November 2018 were ARMs, according to the Origination Insight Report from Ellie Mae, a tech platform for the mortgage industry, compared with 5.6% in November 2017.

Today’s ARMs are typically hybrid ARMs, with an initial period during which your interest rate is fixed, such as five, seven or 10 years. One more unusual ARM option has a longer life.

In 2014, PenFed created a rare 15/15 ARM, a 30-year loan that has a fixed rate for 15 years and adjusts once, to a new mortgage rate for the remaining 15 years of the loan. While credit unions and other mortgage lenders offer a 15/15 ARM, they are not widely used, said Tendayi Kapfidze, chief economist of LendingTree, which owns MagnifyMoney.

What Mortgage Amount Do you Need?
Calculate Payment Secured

on LendingTree’s secure website

What is an ARM?

In general, ARMs offer an opportunity for borrowers to pay a lower interest rate initially, which also means your mortgage payments will be lower. While this can be an advantage, you’re also taking on some risk that interest rates will rise and make your payments much higher when the loan resets.

When interest rates are rising, some borrowers opt to take on the risk of future rate increases in order to take advantage of low initial rates, Kapfidze said. Rising mortgage rates in 2018 contributed to the increased popularity of ARMs, he said, along with higher home prices, which reduced affordability.

The risk of future rate hikes, the downside of ARMs, keeps many borrowers away from the loan product. The Consumer Financial Protection Bureau in a booklet on ARMs suggested that borrowers considering an ARM ask themselves if they will be able to afford higher payments in the future, if they have other expenses looming such as a car loan or tuition payments, how long they plan to own the home and if they will make extra payments to reduce the loan balance. If you plan on selling before your initial loan period ends, you don’t need to be as concerned about rising interest rates.

In addition to evaluating an ARM in the context of your personal financial situation, you can review the provisions of each ARM put in place to prevent too much of a payment shock when the loan resets.

The interest rate for an ARM comes from a combination of an index — such as the cost of funds index, currently at 1.060% — and a margin set by the lender. For example, if the index is 1.06% and your margin is 2%, your mortgage rate will be 3.06%. The margin typically stays the same throughout your loan.

ARMs typically have several caps that prevent your rate and your payments from jumping too quickly. These caps vary from one loan to another, so it’s important to compare them when deciding on an ARM.

  • Initial cap. Most ARMs limit the amount the interest rate can adjust after the initial fixed period, regardless of the change in the index. An initial cap of 1 or 2 percentage points is common.
  • Subsequent cap. Similarly, future increases are also capped each time the loan resets. For example, if you have a 5/1 ARM, the mortgage rate will adjust first after five years and then it will adjust once every year.
  • Lifetime cap. According to the CFPB, all ARMs must have a lifetime cap, regardless of how high interest rates rise, such as a limit of 5 percentage points.

For example, if your initial interest rate is 3.06% and your initial cap is 1 percentage point, your new mortgage rate could only go as high as 4.06%. If your subsequent cap is 2 percentage points, the rate at the next reset could be 6.06%, depending on the interest rate of the index. Your mortgage rate could never go above 8.06% if your lifetime cap is 5 percentage points.

How does a 15/15 ARM work?

While the name “15/15” may sound like the mortgage has a 15-year term, it’s really a 30-year loan with just one interest-rate adjustment after a 15-year fixed period. The reset rate will stay in place for the remaining 15 years.
Similar to other ARMs, the mortgage rate on a 15/15 ARM is tied to an index and has a margin, but because it only adjusts once, it’s considered a more conservative option than ARMs that adjust more frequently.

A 15/15 ARM shares some of the features of a traditional 30-year fixed-rate loan, such as a 30-year repayment period and fixed principal and interest payments, at least for the first 15 years. Borrowers who are nervous about ARMs with interest rates that change annually after the initial fixed period may find this longer fixed period more comfortable.

Similar to other ARMs, 15/15 ARMs have a lifetime cap. Because these loans only adjust once, that cap also functions in the same way as do the initial cap and the secondary cap. Some currently available 15/15 ARMs have a cap of 6 percentage points.

These 15/15 ARMs differ from 5/1 and 7/1 ARMs because they reset only once rather than annually after the initial fixed period. The trade-off for the reduced number of loan-rate resets and the 30-year repayment term is that 15/15 ARMs typically have a higher interest rate than short-term ARMs and 15-year loans. For example, Agriculture Federal Credit Union in Virginia recently quoted a rate of 3.75% for a 15/15 ARM, compared with 3.337% for a 5/1 ARM and 3.625% for a 7/1 ARM. Fixed-rate loans on that same day were 3.375% for a 15-year loan and 4.25% for a 30-year loan.

While the interest rate on a 15/15 ARM is a bit higher than a 15-year fixed-rate loan, the longer repayment period means that monthly principal and interest payments are significantly lower, at $1,389 for the ARM compared with $2,126 for the 15-year fixed-rate loan, assuming a loan amount of $300,000. The monthly principal and interest payment for a 30-year fixed-rate loan would be $1,476.

In addition to comparing monthly payments, borrowers should consider the amount of interest they will pay over their loan period. With a 15/15 ARM as above, you would pay $141,728 in interest during the first 15 years, a savings of $20,794 compared with the $162,522 in interest paid during that same period on the 30-year fixed-rate loan. The total interest paid on a 15-year fixed-rate loan would be $82,730.

Is a 15/15 ARM a good idea for borrowers?

As with any loan you choose, you should consider your financial goals, your plans and prospects and your current budget to make an informed decision.
A 15/15 ARM may work best for borrowers who plan to move before the loan resets, want a lower payment for the first 15 years of their loan or were considering a 15-year loan but don’t want to be tied to higher payments.

Overall, homebuyers expect to stay in their homes 15 years but often move after 10, on average. In many cases, borrowers are likely to have moved or refinanced before a 15/15 ARM loan resets. If you plan to retire and move or relocate in a decade or so, a 15/15 ARM could be a good option for you.

If you plan to pay off your loan within 10 to 15 years but want the flexibility of making lower required minimum payments, a 15/15 ARM might be a good option. You’ll get the benefit of a lower interest rate and can make extra payments to reduce or eliminate the balance before the loan resets without being tied to a higher minimum payment of a fixed 15-year loan.

The big disadvantage of a 15/15 ARM is that you only have one adjustment, which could cause payment shock. For example, if the current rate for your 15/15 ARM is 3.75%, a loan with a cap of 6 percentage points could rise to an interest rate of 9.75%.

“With a 15/15 ARM, it’s hard to know what interest rates will be 15 years from now,” Kapfidze said. “However, more than likely that loan will be paid off or refinanced, rather than reset.”

Before you choose a loan, consider your financial situation, particularly when you plan to move again and your prospects for future income or retirement. Then compare loan rates and details to see which payment and overall loan repayment strategy fits your needs best.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Michele Lerner
Michele Lerner |

Michele Lerner is a writer at MagnifyMoney. You can email Michele here

Compare Mortgage Loan Offers for Free

Home Purchase Quotes

Home Refinance Quotes

(It only takes 3 minutes!)

NMLS #1136 Terms & Conditions Apply