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Is it the right time to go with an adjustable-rate mortgage? MarketWatch Q: With mortgage rates up substan- tially during the past year, is now the time to finance with an ARM? A: Borrowers are more willing to trade low rates for future risk when mortgage costs are rising. That's what happens when borrowers finance with adjustable-rate mort- gages (ARMs). With a fixed-rate mortgage, you have a single-interest rate for the life of the loan and monthly payments for principal and inter- est that are always the same. For instance, a $300,000 loan over 30 years with a 5.5% interest rate will have a $1,703 monthly pay- ment. While the pay- ment amount does not change, each month a little more of the pay- ment goes to reducing the principal and less goes for interest. With an ARM there is typically a fixed start rate that lasts five, seven or 10 years. A loan with a five-year start period that then adjusts each year is a 5/1 ARM. If the start rate is for seven years, the loan is described as a 7/1 ARM. The shorter the start rate, the lower the interest level. In late June, the typical fixed-rate mortgage was priced at 5.81% while 5/1 ARMs were available at 4.41%, according to Freddie Mac. For a $300,000 mortgage, the fixed rate loan has a $1,762 monthly cost for principal and interest over 30 years versus $1,504 for the ARM. That's a differ- ence of $258 a month or $3,096 a year. After five years with a 5/1 ARM, the interest rate can move up or down every 12 months. We have gone from the fixed "start" rate to the movable "fully indexed" rate. There are caps to protect buyers against excess rate hikes and payment shock. For instance, increases might be limited to 2% with the first ad- justment, 2% for each adjustment thereafter, and a lifetime interest cap equal to 6%. This is a 2-2-6 ARM. For an ARM with a 3.5% start rate, such caps mean the first adjustment cannot result in a rate above 5.5% (3.5% plus 2%). The lifetime cap is 9.5% (3.5% + 6%). ARM agreements have historically con- tained caps to limit interest increases, however, because of the historically low rates seen during the past few years, recent ARM agreements also have "floors" to assure that rates do not go below a certain rate. ARM interest rates are based on two fac- tors. First, an indepen- dent index that moves up and down, such as Treasury bills. Second, a fixed amount called the "margin." If the index is at 2% and the margin is 2.5% then the interest rate is 4.5%. If the index moves up to 3% then the new rate is 5.5% (3% plus the 2.5% margin). Are ARMs a good deal for borrowers? They can be attractive if rates stay low after the start period ends, but ARMs can stick buyers with steeper monthly costs if rates rise. Email your real es- tate questions to Peter Miller at peter@ctw features.com. By Peter G. Miller MarketWatch families' needs. No where else can your family members live in such full-scale luxury at an affordable price point than in a Perpet- ual Homes ADU." "If your family member, for example, has been priced out of the area, adding an ADU in your backyard can help them stay in the area and live in a beautiful luxury set- ting," she adds. Our goal is to help families stay together whether it's the boomerang young adults or move- down parents. It's extremely rewarding to help families stay to- gether in the high price Bay Area. Now is the time to act — both for Ander- son and homeowners — to take advantage of new, visionary Califor- nia legislation that en- ables ADUs to be built quicker and with fewer jurisdictional costs. There is no better time to enhance your financial situation and improve your property. California has $100 million available in grants for ADUs, max $40,000 per family, to help finance over 2,500 ADUs. Homeowners with low or moderate income levels may be eligible for this grant. Senate Bill 9, also known as SB 9, just went into effect at the beginning of 2022 and Perpetual Homes has already leveraged this bill to provide fee simple lot splits with Perpetual Homes ADUs for some of their clients. SB 9 gives homeowners in many single-family zones the green light to build ad- ditional units on their current property or subdivide their land into two separate par- cels and sell off one of the lots. Whether you've thought about a multigenerational home, a guesthouse or a rental income stream, SB 9 offers the oppor- tunity to build more on your existing homesite. Several laws passed in 2020 at the state level guide local city and county laws when it comes to building and permitting ADUs. Specifically, AB 68 reduces required set- backs from lot lines, eliminates the need for fire sprinklers in most situations and lowers impact fees if under 750 square feet. Per- petual Homes believes that with the creation of this new law and the rapid increase in demand for housing this is the perfect time to build an ADU. As- sembly Bills 68 and 881 also help to make ADUs easier to install. These laws remove the previous minimum- lot-size requirement, diminish parking requirements for the ADU and shorten the time period for ADU site plans to be re- viewed by cities and counties. Before this legislation, ADUs were desirable but often impossible and very expensive (fees over $100,000) to build on most lots. Most multifamily properties can add two detached ADUs. With decades of ex- perience in real estate development and mar- ket analysis, Anderson acquires the highest- quality homes at the most affordable prices for her clients. Her vast network of pre- fabrication companies, drafters and general contractors make the process of building an ADU much smoother. ADU prices start in the low $200,000s. Whether you want to increase your property value, add a new source of income or provide housing for family members or rent- ers, contact Perpetual Homes ADU for more information! Call (925) 980-2351 or visit www. perpetualhomesadu. com to learn more. Content provided by Perpetual Homes Perpetual Homes from page 2 DL 1557865 ❏Design ❏ Build ❏ Install 4115 Blackhawk Plaza Circle, Suite100,Danville www.perpetualhomesadu.com It'ssimple,wedoeverything. PerpetualLuxBackyardHomes OurexperiencedADUteamdeliversfullturnkeyservice! Multi-generationallivinginyourbackyard GorgeousluxurysinglefamilystyleADUs TheNewportinteriorkitchenlayout More affordable than traditional site-built homes without compromising quality Improve your home's value & livable space with a modular detached backyard home. •Customqualitydetachedbackyardhome •Attractivebackyardcottages •Perfectforfamilymember •Increaserentalincomepotential From permitting, site preparation, foundation, utility connections and construction to final inspection. Permanent foundation. High quality at affordable price point. RWL RWL RWL RWL 23'-4" 52'-0" -0" 22'-1/8" (N) 3-BED 1143SF MFRD ADU CARMEL (925)980-2351 Call us to find out more about adding an ADU All-In Price Starting at $239,000* *PerpetualLuxplansstartatapprox.540sf High-end finishes Dealer number: 1557865 Homes | Advertising Supplement 001 BAY AREA NEWS GROUP H3

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