The 5/5 ARM from Penfed (currently 5.625%)

Some of the best mortgage rates come from credit unions.  Usually you have to work somewhere or live somewhere special to be a part of one.  Why not join the Pentagon Federal Credit Union?  No, you don’t have to go to bootcamp.  If you are a student, you can join for free by joining the Society of American Military Engineers.  If you’re not a student, you can join by joining the National Military Family Association (must pay a $20 membership fee).

The Penfed 5/5 ARM is a pretty good instrument for a couple of reasons:

• Low interest rate (5.625%): Some of the lowest rates around for an adjustable rate mortgage (fixed rates are not bad either)



• 5/5 feature: Rate is fixed for 1-5 years, then adjusts to a new rate that is fixed for years 6-10.  Maximum rate adjustment is +2%, so that means maximum rate in years 6-10 is 7.625%.  Given that most homes are owned for 7 years, you'll probably be better off than going with a fixed 30-year mortgage at >6.625%



• Same rates for conforming and jumbo mortgages: Great in states like California, where most any shack requires taking out a jumbo



• Low fees: Penfed has some of the lowest closing costs out there.



• You can also pay some points to get a significant rate reduction.

In addition to the mortgage, there are several other reasons to join:

• Penfed Visa Platinum credit card:  Pays you 5% on gas, 2% on groceries, and 1.25% cashback on everything.  Also no fees on foreign transactions.  Similar to the Chase Freedom payback, except you don’t have to redeem in $200 increments to get 1.25% back.



• CD rates: Penfed often runs some outstanding promotions on CDs (e.g. they had a 7% 5-year CD several years ago).