Creative financing options can help buyers and sellers close in a challenging market, says mortgage professional
With a substantial drop in mortgage rates seemingly off the table in the near future, homebuyers and sellers are having to be creative to get deals completed. In some cases, sellers are providing concessions to entice buyers across the finish line.
For homebuyers and current homeowners, many are looking for any short-term relief from the elevated interest rates.
Chris Sbonek (pictured top), president and CEO of Mitten Mortgage Lending, said one of the tools being used more frequently in this high-rate environment is the adjustable-rate mortgage (ARM).
“We’re seeing a lot more people open to adjustable-rate mortgages on the refinance side of things,” Sbonek told Mortgage Professional America. “I was talking to someone who is in a 30-year fixed that they had refinanced with another bank about six months ago. Their rate isn't bad. It's par for the market. It's very standard for what they should have.
“I think they're at a 6.99% right now, but they're just really looking for some relief. They bought their house a year ago. Now those tax bills are catching up to them. There have been escrow shortages, because their taxes have almost doubled. They’re really just looking for some relief.”
Hoping to refinance later
Not only will this refinance for the customer move them into a lower payment and rate in the short term, but it will also allow them to avoid a mortgage payment for a couple of months.
“We're going to set them up to refinance,” Sbonek said. “They're going to skip two payments with their refinance. Between the two payments and moving to an ARM, we're going to take them from a 6.99% down to a 5.75%, so we're dropping over a percent. They're going to save almost $200 a month just because they're willing to go to an adjustable-rate mortgage.”
Sbonek said when rates were low in the aftermath of the pandemic, many customers weren’t interested in ARM loans. Now, with the ability to lower the rate in the short term, clients are asking for it.
“In the past, anytime we've talked about it, because fixed rates were so low, nobody wanted to listen or hear about them,” he said. “Now, he’s getting a new adjustable-rate mortgage, and he has no problem at all with it, because he's fixed for five years. He's like, ‘You're telling me I have five years to refinance out of this thing or figure out what I'm going to do.’
“We talked about his life plan and what their financial goals are, and in five years, they hope to refinance into a 15-year mortgage anyway. And I explained to him I could probably get him that rate or better on a 15-year right now. But he doesn't want that 15-year payment.”
While some people weren’t willing to listen to the idea of adjustable-rate mortgages when rates were low, others jumped at the chance, knowing there were limits to how much the rate could increase, Sbonek said.
“I had people that were in adjustable rates back when rates were super low, and they loved it,” he said. “They adjusted all the way down with it. So there's a huge advantage to jumping into something like that.”
Planning for the worst
The plan for many borrowers currently looking at ARM loans and rate buydowns is to refinance if rates decline over the next couple of years.
Sbonek said it’s important for brokers to discuss the possibility of staying with the ARM for the life of the loan, in case rates don’t fall before the first adjustment or there is a significant life change that makes refinancing impossible.
“If they do adjust, we talked about that too,” he said. “What if they don't refinance out of this in five years? What if the worst happens, and right when they’re going to refi, he doesn't have a job for whatever reason? We talked about that too. But there's caps on adjustments. His payment is not going to triple overnight. There are limits on how much they can adjust.”
Speculation about Federal Reserve Chair Jerome Powell's potential departure is sparking anticipation among mortgage professionals for a significant interest rate reduction.https://t.co/RZwKvvlzDy
— Mortgage Professional America Magazine (@MPAMagazineUS) July 24, 2025
Because many homeowners will either sell their house or refinance long before they pay off a mortgage, Sbonek said brokers and customers should keep an open mind about ARMs, especially with the current market volatility and affordability challenges.
“I think people should talk about ARMs,” Sbonek said. “I think the average person is in a mortgage between three and five years before they refi to take cash out, or move, or do something with the house with that mortgage. I would say for probably 80% or 90% of Americans, paying for 30 years of security really doesn't make a lot of sense. In most cases, the adjustable rates make a ton of sense.”
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