Kamala Harris’ Expiring 2.625% ARM Would Jump By $2,600 Per Month to $9,000 If Forced to Refinance
Turns out that ARM loans can backfire for anyone, even the heir apparent to the Democratic party and presidential hopeful Kamala Harris.
A financial disclosure shows that Harris, who has all but secured the Democratic presidential nomination, refinanced her home into an adjustable-rate mortgage (ARM) in 2020 when fixed rates were near all-time lows.
Harris refinanced her Los Angeles residence from a 7-year ARM opened in 2016 into another 7-year ARM, as first reported by The Truth About Mortgage.
The refinance gave her a sweet deal: 2.625% until 2027, at which point she must refinance or let the mortgage adjust upward. Either way, the rate and payment will likely skyrocket.
While Harris has three years to decide what to do, one has to wonder why the now presidential candidate didn’t opt for a fixed rate while rates were rock-bottom.
Could Harris Have Refinanced Into a Low Fixed Rate in 2020?
According to Freddie Mac, conventional 30-year fixed mortgage rates bottomed out at 2.67% in 2020, nearly identical to Harris’ ARM rate. Could she have captured a fixed rate this low?
To be fair, Harris’ loan is probably ineligible for conventional financing due to its size – it’s somewhere between $1 million and $5 million according to the disclosure, and the maximum standard conventional loan at the time was under $1 million, even in expensive LA.
However, it’s feasible to believe that a personal banker at Wells Fargo – where the loan was originated – could secure a sub-3% jumbo fixed refinance for a sitting U.S. Senator and VP contender at time when regular citizens were likely doing it.
So why didn’t Kamala choose a fixed-rate loan in 2020 to avoid a potential 2027 headache?
We won’t speculate, but rates had been so low for so long by 2020 that it was reasonable to assume rates would stay low for another seven years.
No one – not even Biden’s running mate – could have predicted the scale of pandemic-era stimulus in 2020 and 2021 and its inflationary effects two years later, resulting in skyrocketing mortgage rates.
What Shoring Up the ARM Would Cost Kamala
Harris refinanced in 2020, four years into her 7-year ARM. Now in 2024, she is again four years into a 7-year ARM, but the rate landscape is shockingly different.
According to Wells Fargo, where the veep gets just about all her mortgages, a 7-year ARM refinance at the time of this writing would run 6.625%. Keep in mind this is the publicly-advertised rate, potentially higher than the rate a U.S. presidential candidate might get (Wells openly advertises special “relationship offer” mortgage rates and has a dismal record of discriminating against poorer applicants), but we’ll use it as a ballpark figure.
The loan is likely on Harris’ Los Angeles residence judging from ownership history of her real estate (she also has residences in San Francisco and Washington, DC according to Town and Country Magazine). The LA pad is worth around $5 million according to Zillow, but was purchased in 2012 for $2.7 million.
Assuming a 25% down payment in 2012, no additional cash taken in 2016, and regular payments, her 2020 refinance had a loan amount of about $1.6 million. At 2.625%, that’s a principal and interest payment of $6,400.
Today, the loan is likely around $1.4 million assuming regular payments.
If she refinanced that $1.4 million balance at the 7-year ARM at 6.625%, her payment would be $9,000 per month, a $2,600-per-month increase from her current payment.
| Kamala Harris Refi Loans: | 2016 Refinance | 2020 Refinance | 2024 Refinance to ARM | 2024 Refinance to Fixed |
| Likely Loan Balance | $1.8 million | $1.6 million | $1.4 million | $1.4 million |
| Rate | 2.625% | 2.625% | 6.625% | 6.75% |
| P&I Payment | $7,200 | $6,400 | $9,000 | $9,100 |
But what if the presidential hopeful wanted to lock in today’s fixed rate so she didn’t have to deal with a resetting ARM in 2031? Her rate would be 6.75% according to Wells, with an eye-popping payment of $9,100 per month.
Again, many guesses are involved about loan balances and rates, but under almost any assumptions, Harris’ penalty for not taking a fixed rate in 2020 would be quite large.
What Happens if Kamala Lets Her ARM Rate Adjust?
The veep-turned-candidate has a few more years of 2% mortgage bliss. The fixed-rate period on her ARM ends in 2027. If elected, she’ll need to address the loan two to three years into her presidency.
Luckily, simply letting the rate adjust wouldn’t be catastrophic.
Adjustable mortgages come with protections called caps which limit the amount the rate can rise.
According to Wells Fargo, its jumbo ARM caps are:
- Max 2% increase at the first adjustment
- Max 1% increase at future adjustments
- The rate can never exceed 5% above the original rate
This is also known as a 2/1/5 cap structure.
This means that Kamala’s loan would likely adjust upward the maximum amount in 2027, or 2%, to 4.625%. Still pretty good. This would increase her payment by about $800 per month.
However, six months or one year later (depending on the ARM terms) her rate could go up another 1%, and keep rising once or twice per year.
| Adjustments | Rate | Payment* |
| Current Rate | 2.625% | $6,400 |
| 1st Adjustment** | 4.625% | $7,200 |
| 2nd Adjustment** | 5.625% | $8,000 |
| Lifetime Max | 7.625% | $9,900 |
The maximum rate she could ever have on her loan would be 5% above her initial rate, or 7.625%. The payment would be nearly $10,000 per month. If that were to happen, she would likely refinance into the high 6s, if rates in 2027 roughly mirror today’s.
So while Kamala’s ARM isn’t exactly a ticking timebomb, it could potentially rise to a fairly steep payment by the end of her first term as President, provided a victory in 2024.
Was an ARM a Good Idea for the Veep?
When mortgage rates are high like they are now, ARM loans are arguably a good choice. Chances are better that rates will stay the same or drop in coming years.
But one could question the wisdom of choosing an ARM when rates are near all-time lows as they were during Harris’ last refinance.
That being said, Kamala probably had better things to do in 2020 than worrying about her mortgage structure. She may have even been in the VP vetting process during the refinance.
Still, even if your banker or your husband chooses your loan for you, you have to deal with the fallout at some point. And that point could be 2027, in the middle of her presidency provided a victory, a very inconvenient time to be thinking about a skyrocketing ARM loan payment.