- My Forums
- Tiger Rant
- LSU Recruiting
- SEC Rant
- Saints Talk
- Pelicans Talk
- More Sports Board
- Fantasy Sports
- Golf Board
- Soccer Board
- O-T Lounge
- Tech Board
- Home/Garden Board
- Outdoor Board
- Health/Fitness Board
- Movie/TV Board
- Book Board
- Music Board
- Political Talk
- Money Talk
- Fark Board
- Gaming Board
- Travel Board
- Food/Drink Board
- Ticket Exchange
- TD Help Board
Customize My Forums- View All Forums
- Show Left Links
- Topic Sort Options
- Trending Topics
- Recent Topics
- Active Topics
Started By
Message
Anybody use an Adjustable Rate Mortgage?
Posted on 3/13/17 at 4:11 pm
Posted on 3/13/17 at 4:11 pm
Thinking of refinancing to an ARM with a 5 year or 7 year rate lock period. Current rate is 4.25% on a 30yr fixed rate mortgage. Looks like I can get around 3.25% for an ARM with a 5 year rate lock. If I'm going to end up selling the house in the next 5 years or so, is there any downside to refinancing to an ARM with a 5 or 7 year rate lock?
9
Posted on 3/13/17 at 4:15 pm to UpToPar
quote:
If I'm going to end up selling the house in the next 5 years or so, is there any downside to refinancing to an ARM with a 5 or 7 year rate lock?
What if you can't sell the house or end up upside down? Lot can happen in 5 years. Refinancing costs/fees may eat up your savings over a few year period anyways going from 4.25 to 3.25. 4.25% is not a bad rate on a 30 year fixed. Unless you have a lot of money in the bank, I don't see any reason to make the change to an ARM.
Posted on 3/13/17 at 4:20 pm to UpToPar
Financial Samurai loves those things. Goes into pretty good detail about why he prefers them over a 30 year. I feel like its something you can do if you know what you're doing going into it. I just haven't taken the time to research enough to feel like its an option for me. Always do your homework thoroughly is my requirement before I make a move.
Posted on 3/13/17 at 4:24 pm to UpToPar
Not if you're in a decent msrket and put down 20-30%. The odds of you being upside down are nominal. I've used them with all my properties purchased since the crash and it's worked out great. I have my place in Miami at 2.75% using one and it's basically feee money
Posted on 3/13/17 at 4:39 pm to dabigfella
quote:
Not if you're in a decent msrket and put down 20-30%. The odds of you being upside down are nominal
I didn't. I currently have around 10% equity in the house, so being upside down when trying to sell would be my biggest worry. However, I hope to have 20% equity in the next 2-3 years. If I decided to go ARM, I would likely go with one with a 7 year rate lock period. The interest rate would be slightly higher, but it would give me some flexibility when it came time to sell.
Posted on 3/13/17 at 5:54 pm to UpToPar
I've done several 7 yr ARMS since the election as rates have gone slightly upward. I would say they are a little more worthwhile on purchases instead of refi's because you are already having to pay those costs when buying the home. When you refi you will have to pay costs you otherwise wouldn't have to pay in order to get that rate. Run the numbers to see what the difference in rate would save you per year based off of the upfront costs to see what your realized returns would be in those 7 years. And remember the risk you are taking by maybe selling early and not seeing those returns, or living there longer than 7 years and still being in the same house in a potentially rising rate environment
Posted on 3/13/17 at 6:09 pm to UpToPar
I would think it would be hard to make it worth while with only a one point drop, paying all the upfront fees and only staying 5 years, I would look closely at the numbers
This post was edited on 3/13/17 at 6:31 pm
Posted on 3/13/17 at 6:30 pm to Tigerpaw123
^This
Posted on 3/13/17 at 8:34 pm to UpToPar
I'm in a 7/1 currently. Different situation than your though, But I knew going in I'd be moving in 5-6 years, that my salary would increase enough to afford mortgage in the event I couldn't sell it. I also bought in a desirable area in order to increase my ability to sell.
Probably not the best financial decision I've ever made. But wife and I were tired of renting and wanted to be in our own home
Biggest down side seems to be if you can't afford the rate hike/mortgage increase .
Probably not the best financial decision I've ever made. But wife and I were tired of renting and wanted to be in our own home
Biggest down side seems to be if you can't afford the rate hike/mortgage increase .
Posted on 3/13/17 at 8:39 pm to UpToPar
Would be playing Russian roulette in this environment.
Answer: Hell no.
Answer: Hell no.
Posted on 3/13/17 at 9:01 pm to TigerDeBaiter
Agree. Seems to be right product, wrong environment. ARM's have been great during the past declining interest rate run. The tide is turning.
Posted on 3/13/17 at 9:28 pm to ynlvr
Exactly this.
Was going to comment to dbf on that. May have worked out for him 8-10 years ago (and even maybe still) but I wouldn't advise it currently.
Was going to comment to dbf on that. May have worked out for him 8-10 years ago (and even maybe still) but I wouldn't advise it currently.
Posted on 3/13/17 at 10:43 pm to Puffoluffagus
quote:
I'm in a 7/1 currently. Different situation than your though, But I knew going in I'd be moving in 5-6 years, that my salary would increase enough to afford mortgage in the event I couldn't sell it. I also bought in a desirable area in order to increase my ability to sell.
Puff- How much lower was your 7/1 rate compared to a 30 year fixed? I'm in a similar situation and considering an ARM for a relatively short term (4-5 year) property. Like you, the downside potential wouldn't present a cashflow issue if I couldn't sell quickly. I would only take the limited risk if the interest rates were significantly lower.
TIA.
Posted on 3/14/17 at 7:44 am to UpToPar
You have much to consider. The first one is if you think you may retain the property beyond 7 years. The difference in the 1% spread is about $14000 on a $200k mortgage. Assuming a 25% tax bracket and that you itemize, $500 a year in tax savings x 7 = 3500. $11500 difference in net loan cost. Keep in mind that rates will most likely change. The key is how long you intend to keep the property.
Today's buyers are lucky. When I bought my first home the rate on a 20 yr was 13%!
Today's buyers are lucky. When I bought my first home the rate on a 20 yr was 13%!
Posted on 3/14/17 at 8:02 am to UpToPar
I did a 7 year arm, as my wife and I plan on moving around year 5 or so.
Posted on 3/14/17 at 8:10 am to Tigerpaw123
In most cases You probably shouldn't buy if you expect to be in the home less than 5 years. Attendant real estate purchase and mortgage can not be overcome in that time frame without abnormal price appreciation.
Posted on 3/14/17 at 8:51 am to UpToPar
quote:
Thinking of refinancing to an ARM with a 5 year or 7 year rate lock period.
When did you finance your current mortgage? Whats your rate.
We refi'd to a 7ARM when we were getting rid of our PMI.
Posted on 3/14/17 at 8:54 am to barry
Good point. Re-finance costs may negate any savings.
Posted on 3/14/17 at 8:45 pm to Oenophile Brah
quote:
Puff- How much lower was your 7/1 rate compared to a 30 year fixed? I'm in a similar situation and considering an ARM for a relatively short term (4-5 year) property. Like you, the downside potential wouldn't present a cashflow issue if I couldn't sell quickly. I would only take the limited risk if the interest rates were significantly low
Was around a .85-1% difference
Posted on 3/14/17 at 11:24 pm to barry
quote:
When did you finance your current mortgage? Whats your rate.
Two years ago. Rate is 4.25% and paying about $130/month in PMI.
Page 1 of 2
Popular
Back to top
Follow TigerDroppings for LSU Football News