Which way to finance

[RJB1180]

We are looking at moving and relocating.

I was trolling around for mortgages and found something very interesting.

Fixed Rate 30 yr are around or less than 5/1, 7/1, 10/1 ARMs.

This suggests to me that interest rates will go down significantly in the future.

What is the consesus on this board??

I know who all are in love with fixed rates but does that still make sense now.? It seems that fue to the global economy, etc. rates will not go much higher.

Ex. (local Bank- for new location)

3/1 ARM 6.25 % (2/5/2) caps & floors
5/1 ARM 6.375%
15 FIXED 6%
30 FIXED 6.375%

0 CLOSING COSTS
Ex. Wachovia
3/1 arm 6.0%
5/1 ARM 5.875%
3o yr 6%

~4K closing costs
I think I am leaning towards the 3/1 ARM. I know it is a gamble.

[sweeps]

I'm confused. Why would you choose an ARM if it's the same rate as a 30-year fixed? The only reason someone would choose an ARM is when the rate is far enough below the fixed rate to make it worth the risk. (Or, if they believe that interest rates are due to drop, which I would say is not very likely at this point.) Choose the 30-year fixed. You can always refinance if rates do in fact drop substantially.

[anonymous_saver]

Agreed. There is no reason not to take the 30 year fixed loan, especially since even if you went with the 5/1 ARM your interest rate difference is extremely small. Don't take the chance when the difference is almost neglible. If they were 2% points, I may think differently, but less than a .5% difference is not worth it in my opinion.

Congrats on buying a home!