Does anyone have an ARM mortgage?

luvsun27 Posted: Jun 30, 2004 12:33 PM

Does anyone have an ARM mortgage?

Please explain why or why you didn't choose this option? Thanks for your help.

Kim

JENHOS Posted: Jun 30, 2004 12:39 PM

Re: Does anyone have an ARM mortgage?

I have a 30 year fixed mortgage but people I know did it because the rates are lower and they don't plan on being in their place for longer than the loan.

You could get burned with this if you choose say a 5 year with and arm and wind up not moving before the 5 years is up. With Mortgage rates going up if you think you are going to be in one place for awhile I would go with the fixed. The rates are still pretty low.

JMO

sept20yay Posted: Jun 30, 2004 03:41 PM

Re: Does anyone have an ARM mortgage?

FM!

Misha Posted: Jun 30, 2004 05:22 PM

Re: Does anyone have an ARM mortgage?

When we bought our first home we did an ARM mortgage because we knew we wouldn't be there for more than five years (we actually moved after 2 years) and since the rate was lower it made more sense. With our second house we went with a 30 year fixed because we will probably not be moving for several years (unless of course I win the lottery!).

februarybride Posted: Jul 01, 2004 01:26 PM

Re: Does anyone have an ARM mortgage?

When we first purchased this house, we had a 30 yr fix. We didn't know anything about mortgages so we didn't even know about all the ARM options. All we knew was a 5 year which for us was a little too close for comfort. Looking back we should have just did the ARM.

We just refinanced to a 7-yr ARM at a great rate. For us it made sense, we're saving over $600 a month. Another comfort is that we don't plan on living here forever. I say another 3 years at most.

Also, on an ARM, the most the interest rate could go up is 2pts in 1 yr - no more than 4 pts total for the lifetime of the loan. For us, even after the 7th year if it went up 2 pts it would still be less than when we had our 30 yr fix. Some things to consider!

KarenB Posted: Jul 01, 2004 02:08 PM

Re: Does anyone have an ARM mortgage?

What is a 7 year ARM? ARe you saying that even if your rates went up 4 points as high as it can it is still a better rate than a 30 year fixed mortgage.

februarybride Posted: Jul 02, 2004 12:48 PM

Re: Does anyone have an ARM mortgage?

A 7-yr ARM is a 30 yr mortgage with a fixed rate for 7 yrs. After the 7th year, the rate is variable...meaning that it goes up or down.

We closed 2 yrs ago and got a rate of say 7%. We refinanced to a 7-yr ARM which was at 4%. After 7 years the rate can go up -- at most 2% that first year which = 6% (still less than our original 7%). The most our rate could go up after the 8th year or ever on our loan would be 8% -- higher than our original fixed of 7% but -- not that bad since we are saving so much now and could throw a whole bunch of extra to the principle instead of the interest. But our goal is to be out of here within a couple of years but if we had to be here for longer we are pretty much covered for 8 yrs!

Once the fixed rate expires, you can refinance if you wanted. I think if I were staying here I would probably go with a fixed rate and not an ARM - unless I knew that I could pretty much pay a huge amount of the principle down and plan on refinancing if it made sense after the rate expired.

Sorry so long!!!!!!

februarybride Posted: Jul 02, 2004 12:50 PM

Re: Does anyone have an ARM mortgage?

How long do you plan on being in the home?

KarenB Posted: Jul 02, 2004 02:25 PM

Re: Does anyone have an ARM mortgage?

Once we decide where to go/what to buy, we don't plan on moving again until it is time to retire.

We are in our early 30's now so we'll be staying put a while.

Thanks for your explanation it is very helpful.

skew Posted: Mar 21, 2005 12:52 PM

Re: Does anyone have an ARM mortgage?

Bumping for additional input.

maybe i am not understanding something, but why WOULDN'T someone opt for an ARM over a fixed? rates for an ARM are considerably lower than a fixed and if you plan to stay in the house past the life of the fixed ARM period (3/5/7), you could always refinance.

sophie78 Posted: Mar 21, 2005 01:10 PM

Re: Does anyone have an ARM mortgage?

We do because we only plan on staying in the house five years. So the rate we have now is cheaper than if we got a fixed. It adjusts in 5 years, but by then we will have moved. Even if we don't, it still ends up cheaper with the ARM than with a fixed as long as we move within 7 years.

meghanmetz Posted: Mar 21, 2005 01:25 PM

Re: Does anyone have an ARM mortgage?

Posted by skew

Bumping for additional input.

maybe i am not understanding something, but why WOULDN'T someone opt for an ARM over a fixed? rates for an ARM are considerably lower than a fixed and if you plan to stay in the house past the life of the fixed ARM period (3/5/7), you could always refinance.

Basically, the reason why I didn't go for an ARM, and got a fixed, was because you have no idea where mortgage rates will be in 3,5,7 years. So while you can refinance once the ARM is up, at what rate will you be financing? If rates are 10% in 3,5,7 years than that is the rate you will be refinancing.

I agree that if you know you are only going to be in a home for a few years, go for an ARM, but i felt much more comfortable with a 30 year fixed that will never increase over 5.5%.