A Call to ARMs

This is in response to the mortgage question-and-answer item “Adjustables Have Lost Their Advantage” (Feb. 4, Special to the Times). All things being equal, I would agree it would be wise to take a fixed-rate loan over an adjustable-rate mortgage these days.

However, there are some advantages to adjustable-rate mortgages that are of great significance to some borrowers.

--Many people can’t quality for the higher starting rate of a fixed-rate loan. Many lenders qualify people at starting rates as low as 7.5% on adjustable-rate mortgages. It may be better for some people to start out with an ARM.

--In many instances borrowers are allowed higher loan-to-value ratios with an ARM than with a fixed-rate mortgage.

--Also, there are many adjustable-rate mortgages that can be obtained for no points. Most fixed-rate pricing involves points.

--Many adjustable loans have the possibility of negative amortization. The required monthly payment and increases are limited and would allow some borrowers to afford the payment when they could not on a fixed-rate loan.

KATHLEEN M. DAGG

Pacific Palisades

Dagg is vice president of First Capital Corp., a Pacific Palisades-based mortgage broker.