Question 1

How much lower are ARM rates than fixed rates in Salinas?

Accepted Answer

ARMs typically start 0.5-1.0% below fixed rates. A 5/1 ARM at 5.75% saves roughly $250/month on a $600k loan versus a 6.5% fixed rate. Rates vary by borrower profile and market conditions.

Question 2

What happens when my ARM adjusts after the fixed period?

Accepted Answer

Your rate adjusts based on the index plus margin, subject to caps. Most ARMs cap annual increases at 2% and lifetime increases at 5-6% above the start rate.

Question 3

Do ARMs make sense for Salinas agricultural workers?

Accepted Answer

Seasonal ag income complicates ARM qualification since lenders use worst-case payment scenarios. Bank statement ARMs or portfolio products work better for farm owners with fluctuating documented income.

Question 4

Can I refinance my ARM before it adjusts?

Accepted Answer

Yes, and most borrowers do. Refinancing before your first adjustment lets you capture the low start rate without facing higher adjusted payments. No prepayment penalties apply to most ARMs.

Question 5

What ARM term works best for short-term Salinas buyers?

Accepted Answer

A 5/1 ARM suits buyers planning to sell or refinance within five years. If you expect to stay 7-10 years, a 7/1 ARM provides longer rate stability with minimal rate premium.

Adjustable Rate Mortgages in Salinas — Lower Initial Rates for Farmland Capital Buyers