The 3.13 Percent Mortgage

• December 14th 2010

by Joe Marhamati

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Last week, long-term interest rates continued to creep back up from their record sub-4.2 percent lows, which resulted in some buyers getting off the fence while others started looking for new mortgage options.

For those with a good chunk of money on hand, ING’s Easy Orange may be a practical alternative to more traditional mortgages, but borrowers should fully understand how the loan works before taking advantage of the enticingly low 3.125 percent interest rate.

ING’s Easy Orange is not quite a conventional mortgage product and not quite an exotic one. The mortgage is a 5-year fixed, 30-year amortized loan. So, in other words, borrowers pay the low rate for five years and then either pay the remaining balance at the end of that period or refinance to the thirty-year rate. The difference with the ING loan is that customers can lock in a new rate at any time during the life of the loan. Whenever a borrower wants to change their rate, all that is required is two biweekly mortgage payments and the deal is done.

However, borrowers who can wait to lock in a new rate until the final three months of the loan period will get the most out of this mortgage option. In the final three months of the five-year period, borrowers can lock in the current ING rate for another five years free of charge. This is a one-time option and at the end of the second five years borrowers must either pay the balance of the loan or refinance to the 30-year mortgage rate, but it seems like a no-brainer to take advantage of this rather sweet option that extends the low rate for another five years. K.J. Oommen of Primary Residential Mortgage told UrbanTurf that ING’s philosophy is that most homeowners stay in their property for seven years or less and therefore it doesn’t make sense for the default to be a 30-year fixed rate mortgage.

ING Easy Orange mortgages are not for the cash-strapped. For one thing, this type of mortgage requires a 25 percent down payment, which is a serious chunk of change for some buyers. Also, if the borrower does not lock in a new rate during the five-year life of the loan, they either pay the remaining balance or pay the refinancing fees. But in part because of these requirements, ING was one of the few banks that didn’t fall neck-deep into the mortgage mess, and didn’t require government assistance. Additionally, because they don’t bundle their loans into securities and concentrate on financially responsible consumers, their rates are usually lower than their competitors.

Do not be mistaken: the ING Easy Orange mortgage is not for everyone and potential candidates are primarily those who are financially comfortable. However, if you are in this boat and plan to live at your home for 5 to 10 years, this nontraditional product will likely serve your needs.

This article originally published at http://dc.urbanturf.production.logicbrush.com/articles/blog/the_313_percent_mortgage/2763.