Better Mortgage Rates: Online or offline banks? on 100 Mortgages

Mortgage lenders and holders have taken a battering lately, but companies like ING Direct, an online bank have been doing well whilst the larger bricks and mortar banks have tumbled over the last couple of months.

ING direct is offering a 5/1 year ARM online mortgage, which is an adjustable-rate mortgage where the rate adjusts after five years. Given that the national average rate is now at 6.01 percent the ING 5/1 ARM is 5.25 percent making it look more attractive to the consumer, Other On-line banks that are offering similar deals are Emigrant Savings, E-Loan and MTG Capital.

But these deals could seem too good to be true for some customers. We look behind the curtain of the online banks to see how they can offer these rates. First they run in the style of Amazon, Wal-Mart and Ikea, they are able to offer thousands of competitive products and they have no overheads for example no branches.

The idea behind the 5-year ARM is that you pay the low rate for five years, as the average American moves every 5-7 years, but the rate will go up after the five years, but the banks assure that the adjusted rate will remain below the nation average which is currently at 6.01 percent according to date from Bankrate. Of course there is no guarantee it will stay this low, as you are not locked into a fixed 30-year deal just a five to seven year deal.

Source: blogs.wsj

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