30 year Vs ARM

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30 year Vs ARM

Post by glacierbob »

Building our “forever home”. Which I know is statistically no longer than 10-12 years. Getting quotes from lenders.

Looking at march as closing time. Likely rates will either not change or go down between now and then right?

Also what lower rate would make an arm worth it?

I am biased toward 30 year just because I like the predictability.

Interested in the groups thoughts on mortgage psychology.

I think I’m most interested in a low rate and low cost to refinance in the next 5 years.

Also trying to stay under the 750k conforming loan limit to make the rate more attractive.
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Re: 30 year Vs ARM

Post by Beachey »

glacierbob wrote: Mon Nov 20, 2023 3:05 pm
I think I’m most interested in a low rate and low cost to refinance in the next 5 years.
I think you look at what your rate for a 5-year lock ARM is versus 30 Years and make a decision. Just looking at my credit union, 30-year fixed is 6.875% versus a 6.125% 5YR ARM. My inclination was always to go for the ARM though I was typically more partial to 7 to 10-year ARMS except for my last few when rates were so low.

This is making the guess that rates will go down in the next 5-7 Years and making a projection of where you will be in 5-7 Years. The deciding factor is how well you sleep at night with the ARM mortgage.
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Re: 30 year Vs ARM

Post by milktoast »

I no longer have mortgage, but yeah look at the 5-year and 7-year ARM and compare to 30 year.

One way to figure this out is with an amortization schedule assuming worst case adjustments. The last time I got a mortgage the best 5 year ARM didn't hit more "interest paid" than the best 30 year fixed until 8 years in. That is a long time.

Especially now with the rates high, what you are gambling on is not whether you can pay it off before the break even but whether rates will drop by 1-2% before then.
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