7 Year ARM vs 30 Year Fixed

Uber coderlite
May 28, 2018 37 Comments

Planning to lock the rate for our home soon.
Ally is offering 4.25% for 30 year fixed vs 7 Year ARM is 3.75%

Folks who have recently bought homes, what did you choose and why?

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TOP 37 Comments
  • Microsoft lzmz70
    It depends if you are going to stay in same home for more than 7 to 10 years. If you have plans to move out and get upgraded soon 7ARM will be better
    May 28, 2018 9
    • Amazon / Eng asdzxc
      This is idiotic! You can move ur mortgage over to a new purchase so why the fuck would you care and do an idiotic 7arm over a fix30? Just fucking stupid
      May 28, 2018
    • Cloudera / Eng AllAboutTC
      No, you can’t move mortgage. New place new mortgage.
      May 28, 2018
    • New / Eng Mittens
      Amazon did you mean do to suggest refinancing?
      May 28, 2018
    • Amazon / Eng asdzxc
      Every mortgage company ive ever dealt with allows you to move over mortgage from place a to b (rather than paying off ur current mortgage and getting a new one on the new place) helping u save the ur existing % if lower. Of course, this can be coupled with a 2nd mortgage of your current balance dos not cover the full $ of the new place.
      May 28, 2018
    • New / Eng
      Luffy, M.D

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      Luffy, M.Dmore
      I haven't heard of a portable mortgage in the US since the financial crisis and they weren't exactly common back then. They were common in my parents' day but that's a long time ago (my folks bought in the first half of the 1970s).

      Basically entirely incompatible with the modern way of securitizing mortgages. Never hurts to ask, but if you don't have portability in writing when you open the loan, you don't have a portable loan.
      May 28, 2018
    • Amazon / Eng asdzxc
      This is true, should always ask. However, always do my DD before signing onto a provider. I dont simply go for the lowest %, i make sure it has be flexibility i need
      May 28, 2018
    • Amazon / Eng asdzxc
      Also, i still dont see why you would want to take on the risk of a ARM rather than a locked in 30 regardless of keeping a house long term or not. The amount of $ ur saving compared to stability in case of a “life changing plans” makes no sense
      May 28, 2018
    • Proofpoint (+_+)
      Rate is way too high. Locked in 3.875 on a 30 year this week. Second bank offered 4.0 on 30 yr fixed.both with no points.
      May 28, 2018
    • Proofpoint (+_+)
      For the many who messaged me, this 3.875 on 30 year fixed is bank of America for bringing 500k to Merrill edge and a loan of over a mil.
      May 29, 2018
  • Arxan cIUk51
    Most of the people who lost houses in the recession had ARMs that increased so much they couldn’t make the payment. (I just Googled an example in a news story where a payment went from $2900
    To $4200.) I have a 30-year fixed with no penalty for early repayment.
    May 28, 2018 5
    • Amazon roder
      This is why you put down 25% or more and then max your payments to pay it down as fast as you can.

      If things go to hell you have the ability to refinance in that case without needing to get desperate.

      If you are putting down less then 20% then 30yr fixed is the price you have to pay for buying a home your can't really afford.
      May 28, 2018
    • New / Eng
      Luffy, M.D

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      Luffy, M.Dmore
      If the rates go up and fuck you on your original loan, they will have also gone up on the 30 year fixed.

      Rates are still near all time lows. If you can afford 15 year in worst case scenarios, go for 15 but I wouldn't touch an ARM.
      May 28, 2018
    • Google Facebook
      The payment goes up 1.3k and you can't afford it anymore? You shouldn't have gotten a mortgage in the first place. Lol
      May 28, 2018
    • New / Eng
      Luffy, M.D

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      Luffy, M.Dmore
      People have varying amounts of discretion in their budget, and the downside is potentially unlimited. Rates going from sub-3% to 6% ish is a big difference and I remember a day when 8.5% was a normal rate.
      May 28, 2018
    • Google Facebook
      If we assume you aren't gonna ever refinance for some reason, with ARM your rate won't exceed +5% in the worst case, which would be about 9% if you get a 4% mortgage today. Thus, if you get a 600k mortgage now and pay down at least 300k over the next 7 years (extra 45k a year to pay down shouldn't be an issue for most folks who can afford such mortgage), you'll pay 27k of interest starting year 8 at 9% in the worst case. Which is the same as if you started paying your 4.5% 30 years fixed on 600k initially. But you've been saving 0.5% of interest for 7 years. And if the rates really went so high then the economy must be strong: you're likely making much more than 7 years ago and the house has appreciated significantly. And even more likely, you're already looking to move or upgrade.
      May 28, 2018
  • Microsoft 1c97b7e7-
    30 year fixed all day
    May 28, 2018 0
  • Google Facebook
    7 ARM all the way and pay it aggressively in a first few years to bring the interest component to your current rent payment or below.
    May 28, 2018 0
  • Citibank / Eng id 10 t
    If you plan on paying it off then lock it in30 years. If you plan on selling in the next 5 - 7 years then go arm. Prices could go down by then but you should be ok if you put down a large down payment
    May 28, 2018 3
    • Amazon eddi
      But if you plan on paying it off fast 30yr just means a higher rate
      May 28, 2018
    • Citibank / Eng id 10 t
      True.
      Just depends on how fast
      May 28, 2018
    • New / Eng
      Luffy, M.D

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      Luffy, M.Dmore
      The higher rate comes with the flexibility of dropping your payment back to the 30 year level if you ever have cash flow issues.

      We havr a 30 year loan, are paying it off faster but not as fast as 15.
      May 28, 2018
  • Facebook Narciss
    Arm.
    You never know.

    No point throwing money in interests which you won't deduct
    May 28, 2018 0
  • Apple tuolumne
    Easy answer. 30 year fixed. Half a point isn’t enough savings to offset the certainty of 4.25 for 30 years. 7 years from now the ARM will be much more than 4.25.

    Unless of course you have a crystal ball telling you that you will sell the home and leave in 7 years.
    Jun 1, 2018 7
    • Amazon solatido
      What if I plan to cash my RSU every year to make extra payments and carry the regular payment off my base?

      Then I'm paying down an extra 100k+ a year and in 7yrs will have made 700k+ in extra payments. At that point even if rates rise dramatically my mortgage has become much less so my payment is not likely to go up.
      Jun 1, 2018
    • Apple tuolumne
      What if....what if...what if. The reality is you likely won’t. Throwing so much money into a single asset is not a good strategy. The amortization schedule for 7/1 and 30 year fixed is really not drastically different for the first 7 years. But sure as fuck is on year 8.

      Make one extra payment per year. Invest your RSUs and extra money in the market.
      Jun 1, 2018
    • Amazon solatido
      A mortgage isn't an asset, it's a liability. You're paying that debt back regardless what happens to the associated asset (the home).

      From a risk/return perspective paying down debt is highly efficient.
      Jun 1, 2018
    • Apple tuolumne
      If that’s how you view it then why buy a house at all? Stocks outperform housing every time. You’d do much better keeping your money in the market and renting cheap rather than dumping everything into your house (the asset I was referring to). What happens when an EQ or fire comes along and destroys your house. Oops. All that money is gone. I know people who were not able to retire because of the north ridge quake.

      Diversity diversity diversity.
      Jun 1, 2018
    • Amazon solatido
      So if a fire destroys your house you still owe the mortgage. That's my point that it's a liability, not an asset.

      Paying down a mortgage IS NOT investing in the house. Doing renovations is investing in the house.

      Paying down the mortgage is eliminating a liability that is costing you significantly more than the rush adjusted rate of return on any possible investment.
      Jun 1, 2018
    • Apple tuolumne
      And remind me again what this has to do with a 30 year fixed vs 7/1? 700k mortgage Amortization over 7 year puts the 30 year fixed at 195k in interest payments vs 171k with the ARM. If you took you 100k extra per year and invested it in the market at 7% ROI, your have 925k conservatively at the end of the 7 years. You could just pay your house off with cash after paying the tax on the withdrawal and have more money than if you dumped it all in the mortgage.

      Either way the 30 year fixed gives you more options across the board. Because let’s face it. You won’t be so mathematically diligent with your money. You will spend a lot of it. You will buy a new car. Renovate parts of the house. Go on vacations. Save up for your kids college, get married, buy some other investment, etc...

      Better to trade some nickels and dimes for more flexibility.

      Friday. Beer time. Cheers. 🍻
      Jun 1, 2018
    • Amazon solatido
      7% taxed return on a risky investment is a loss versus a guaranteed tax free 4%. Conservatively in 7yrs your 100k investment may be worth 50k. It's only on 25 year and up timelines that stocks have consistently beaten bonds.
      Jun 1, 2018
  • Uber 837er
    Citi offer 3/8th off your rate if you can deposit $200k with them. You can withdraw the money after closing. Let me know if you need an intro.
    Jun 9, 2018 2
    • Google rentorbuy
      I need an intro now for a loan
      Sep 14, 2018
    • Uber 837er
      Message me your email address
      Sep 16, 2018
  • Facebook EvhB65
    0.5% seems like a pretty small discount for the shorter lock term. If you are certain you will stay there less than 7 years and want to sell, then sure. But otherwise, I’d take the 30year loan.
    May 28, 2018 0
  • Amazon eddi
    7yr. Aim to be able to pay off your mortgage faster anyway. I paid off my mortgage in 12 years. By 7 yrs I had lots of equity.
    May 28, 2018 0
  • Workday wRBO34
    Op, what did u choose?
    Jun 8, 2018 0