are ARMs bad?

[Ima saver]

Well, I have never had an ARM. When I bought my first house, they always financed for 20 years.
I have had a few land mortgages, but I always went with a fixed rate mortgage.
I am mortgage free, glad to say!

[myself]

I've even had a Heloc in the first mortgage position on our last condo. The rate was a ridiculous 2% and we could pay it off faster. It turned in our favor, then as rates rose we refinanced into a fixed 30 year fixed. Which was okay, but we thought then we would keep our place forever. Turns out we didn't.

Thus I've learned that never make plans for forever, it doesn't work. Just do the best you can as you know it.

I am however pretty sure I'll never do a 15 year fixed, mainly becuase you can do a 30 and pay it in 15, but you can never go from a 15 year to 30 year payment if you need to.

I still think that most people should understand all mortgages, especially the one they pick. No mortgage is inherently bad, I just think people abuse them like CC. And are quick to blame the lender, when they should have been more educated. Exactly like CC.

What you say is true. However, I consider it a sign of self-imposed early mortgage payment. Instead of saying, yes dear we can get another <widget> even though it's just a little different than the one we have already.
FWIW, we have 13 years left on a 15 year fixed mortgage @ 5.25%. As a matter of fact, this coming November is the halfway point (my phrase for "the point where more of the monthly payment goes towards the principle").

Now, since the mortgage is fixed for that term, we can focus on generating money with what is leftover, and figure the mortgage will be paid off by the time I'm 56 (and the Mrs. is 49).

And the first mortgage on the same house (in 2000) was a fixed 30 year @ 8% (due to our higher debt to income ratio and credit ratings at the time).

[LivingAlmostLarge]

People who are disciplined enough to understand ARMs, CC, and other loans responsibly are typically able to use a 30 year fixed to their advantaged. Say you want to max out your 401k/IRAs, but with a 15 year fixed you can't. But if you get a 30 year you can.

So you do it. Then as your income rises, you are suddenly able to pay more to the mortgage. Chances are you will, why? Because if you were disciplined enough to think about maxing out all retirement contributions and saving opportunities, then you probably are not fiscally irresponsible.

But that's just it, I think. Fiscally responsibility still falls to the person.

[Ima saver]

If I had to get a mortgage today, I would go with a 15 year fixed rate mortgage.

[msnln]

I have never had ARM mortgage but if I were to get a mortgage now, I would probably go with an ARM instead of fixed 15 or 30 years.
ARMS are getting a lot of trashing these days because up until couple of years ago, short term interest rates were very cheap. As such, banks used ARMS like teaser rates to induce people to buy more house than they would have been able to afford. Then, the Fed started raising rates and Fed Funds rate went from being 1% in 2003 to 5.25% today.

At current rates, Fed Funds are stable and chances are Fed will have to start cutting the rates, especially if housing bust causes recessionary pressure. That means ARMS rates will start going down, more so than fixed rate mortgages. These cycles take few years so you can get better rates until Fed Funds rate go down to about 3.25 - 3.5% and then you can refinance to fixed rate.

To me, interest only loan = rent. IF you are going with IO loan, then don't buy a house, just rent until you can afford mortgage payment.