The difference between them is ~300$ per month. Loan amount 1M. Got 3.25 for 7/1 ARM and 3.75 for 30 year fixed. I am inclined towards 30 year fixed since i don’t have to worry about refinancing later and if were to buy another house and rent this one... I can take advantage of my existing loan that I get as primary owner occupied. Folks who have been in similar situation - what made you take one over the other?
If you plan on keeping the home for longer than seven years go for 30 year fixed. The rates are much more likely to go up in the coming years and refinance later would be on a higher rate. Anything can happen for sure, and the rates might stay or go lower, but the indication currently is that they'll go up.
Go with fixed if you have a motivation to keep the home beyond 7yrs. Fixed rates are expected to go up, another way of looking is that there a very little chance they will go down
Normally I would take an arm if I plan to live there for a short while
I was in a similar situation and went with 30y for the simplicity/ long term peace of mind with possible rise in rates (mine is at 3.75 too)
Go with 30 year fixed. It’s a pretty good rate in any case for 30 year. And if you wish to, pay off more earlier. That way you save on some interest and effectively reduce the rate even further. Don’t go for ARM since it brings in a lot of uncertainty and variables with it.
@ folks saying the interest rate would go up, why do you predict so? I agree there is uncertainty with an ARM, wrt increasing rates. However, if there is a recession in the next 5 years (which we're overdue for), wouldn't the rates drop?
Nobody knows if rates will go up or down. Historically, we are close to the lowest rates have ever gotten. So it’s best to go with those for a longer term like 30 year. In case rates go down, you can always refinance. In case they go up, you may not have the option to get a good rate even with refinance if you are on ARM.
Agree on the historical aspect. However, if the rates go down, you can refinance irrespective of the loan type. In the recent past, the FED has used lower rates to spend out of a recession, which was not the case earlier. This makes the case for an ARM and refi, as rates drop.
10/1 ARM is the middle ground. Gets you better rate than 30 yr and more peace of mind than 7/1.
Go with 30 year fixed and set it up to biweekly payments. You'll save about 100K in interest over life of the loan and will payoff about 5 years earlier.
Go with 7yr ARM. Use the extra $300/month to purchase lottery. Hopefully you will win lottery in the next 7 years and pay off mortgage for good!
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which bank gives 3.75 for 30 year fixed ? can pm me contact i am on 3.37 for 10 arm
BOA - I locked both a month ago and rates are up now as I understand.