Talk me out of a 7 Year - Adjustable Rate Mortgage loan

What are the annual and life caps on changes in the interest rate? Interest rates will inevitably go up, although it may not be by much, it is something you should consider with an ARM.

quote:

---

What are the annual and life caps on changes in the interest rate? I

---

5% but i plan on selling the home before the 8th year hits and those go into play

15 year rate this week was 2.75 fixed, that's crazy to not take advantage of if you can afford it.

Don't be afraid of the ARM just because of its bad reputation.

We really benefited by using an ARM for our first house that we knew we were going to be out of in 5 years. We looked at what a 30 year fixed loan payment and amortization schedule would have been. Then we looked at ARMs but paying extra (ie keeping the same payment as the 30 year fixed would have been).

Due to the front loading of interest payments on a 30 year mortgage we wound up building way more equity in the house by taking out a 5 yr interest only ARM but making extra payments equal to fixed loan cost.

You have to commit to making up the difference in extra payments to really make it worth it.

quote:

---

he looked at a 20 year and it was 3.75% so not sure if 15 would get me under 3

---

Try another lender. I was able to get them down about a year ago to 3.65% on a 30 year product just by putting them in a bidding war.

Did a 7 yr ARM over a year ago b/c I knew i was planning to sell in next 2-3 years.

Went through Quicken Loans and only came out of pocket for the appraisal. Seamless process.

I did a 7ARM a year ago. Needed to refi to get my equity over 20% to ditch PMI.

Same boat, I know with a great deal of certainty that we won't be in this house 6 years from now. Yea things change, but at least for me, even if i had to take on adjustable rates for a year or two, it wouldn't be a big deal.

ARM's didn't sink the market btw, lending to people who had no business buying the home they did sank it. Giving them these types of loans was the only way they could afford the house. My mortgage payment is like 7% of my take home income right now, not worried about interest rates.

quote:

---

Plans can change very unexpectedly. As Mike Tyson said, "Everyone has a plan until he gets punched in the mouth."

---

Such a great quote. I feel that Patton could have very easily said it, and it applies to many different aspects of life. And even though it was said by a notoriously financially illiterate moron, it's cited in a discussion on pros and cons of different types of mortgages.

Damn to the 2.75, we did 15 year last summer and got 3.5 IIRC.

I know a lot of people say do 30 year and pay extra towards principle - we aren't that disciplined.

It is insane watching the principal balance on the 15 year versus the 30 year. Day 1 of 15 year each payment has close to 45% going to equity. If you lived in a state that didn't have TX level property taxes, I imagine even more.

I priced it out assuming we'd be in the house for another 5 years from refi, payment was only going to be an extra 300-400/mo and we will have 50-75k more in equity.

watch the movie 99 homes