5 year ARM 6% or 30 year loan for 6.875?

Adjusted to what the bank has the interest rate for a 5 year ARM at that time. Could stay at 6, could go down, could go up. That’s my dilemma, do I want to chance it coming down eventually or will it bite me and go way up?

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30 year. If it goes down, refinance. If it goes up, you’re safe.

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This

Man who is that with? I haven’t seen ARMs sitting better than Fixed in along time

Jimmy Carter 18% interest rates in the 80’s said hello.

Honestly, we’re still in a somewhat low rate environment IMO.

You arent giving enough information for the MT.

1) what is the index for the arm?
2) what is the margin to the index?
3) (less important) are there per period caps and lifetime caps on the arm?


The average duration of a mortgage is under 5 years. But knowing the mechanics of how the arm works is important.

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after 5 years to whatever the going ARM is at that branc

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If you don't know the mechanics of this, then don't take the arm.
You should never sign a contract when you don't know the terms of the deal.

There are very good ARMS out there.
And there are awful ones.

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The 6.875 would need me to buy down to get to that at a cost of 1600$.

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If you are contemplating an ARM mortgage at the same time you are contemplating paying down points, then you are all sorts of confused.

You look at mortgages like a dick measuring contest. A fool and his money....

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Can ride interest rate decreases via refi.

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The irony is that everyone purporting to refinance to a lower rate in the future is indirectly supporting a 5 year arm (if you aren't going to use a 30 year fixed rate, why pay extra for it?).

I've seen ARMs tied to the 6 month LIBOR or 1 year Treasury with a 0.25% to 1.25% margin. The lower the margin, the more likely I would recommend strongly considering the ARM (especially at 0.25% margins).

I've also seen ARMs tied to 7% over prime. That's insane.

Last I checked, the average mortgage duration is just over 4 years. Which means that the majority of Americans would be better in a 5 year ARM than a 30 year conventional mortgage.

Just food for thought.

The arms weren't so much the issue as the labor market in 2008.

Joblessness created foreclosures.

Foreclosures created a loss of equity which did bite people in "bad arms" without the ability to refinance.
But the loss of household income in 2007 and 2008 bit those same people just as hard.

It doesn't matter if you have a 600 credit score or 850 credit score if you are unemployed or underemployed for 6-18 months.

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Not supporting the ARM but the security a fixed rate provides. Of course if the rate is lower in 5 years refinance. But what if it’s not lower til year 6 or 7? What if it’s never lower? A bird in the hand is better than two in the bush type situation for me.

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I'm not denigrating the security of a 30 year or 15 year fixed mortgage.

I'm suggesting that people hold it to a standard that isn't practical.

I'm not making up the statistic about the average duration of a mortgage being about 4 years.

I'm not making up the mechanics of an ARM at the 1 year Treasure +0.25% margin.

If you took out a 30 yr fixed in 2001 after 9/11 when mortgage rates dipped, you could get a 6% mortgage if you timed it right.
A 5 year arm may have been 5.25% (I don't remember, but that may be an accurate spread).
In 2007 when that arm began adjusting, the rate would still be 5.375%. And rates fell like a rock in 2007 and 2008. By January 2009, the rate would be 0.67% (or most likely at a 1% floor). And that rate would hold until 2018 where it would peak at 2.875% before dipping back down again with Trump in office.
Today, that rate would be 5.25% (after 14+ years of unprecented rates). Where would your mortgage balance be if your average rate was under 2% for the past 15 years and you never had to refinance in the past 21 years during that course to earn the rate?