Adjustable Rate Mortgage Loans?

[Ima saver]

When I worked at a saving and loan assoc. from 1977-1980, the interest rates on homes was 9%. I would go with a fixed rate also, that is all I have ever had.

[shizane101]

Thomas,

It's great you're asking questions about this. I used to be a part-time mortgage broker and came across many people who didn't really understand why anyone would ever consider an ARM. They may have heard from a friend to absolutely stay away from ARMs. I'm seeing some posts about that here as well. That's too bad because there can be compelling reasons why, in some cases, you would choose an arm over a fixed rate. Some poster here have already done a good job explaining some of the reasons why you may want to go with an ARM such as, length of time you will be in the home and considering current interest rates on a fixed loan (are they historically high?).

I have a very cool Excel amortization spreadsheet I can send you if you'd like. You can plug-in the length of the loan, the amount borrowed, and the interest rate to see what your principal and interest (P &I) payment will be. It also shows you what your remaining balance is after every payment. Another cool feature is that you can plug-in an extra payment you make on any month of the loan and see how it affects your remaining balance.

One more thing... I've got some great tips on how to get the best deal when shopping for a mortgage broker. I wrote these up a year or so ago and emailed them to friends and family. Some of the are a bit unconventional, but I think its good info.

You can just private message me if you're interested. I can send these to anyone else who would like a copy.

[anonymous_saver]

Anonymous Saver, why do you assume I'm going to be paying 9.25%? Did you not read my post? I pay 4.25%, and I'm pretty sure I'm out by the 7 year mark. Um, so how am I paying more interest? If anything I just saved 1.75% interest for 7 years on $450k. How much is that? $55k. That's a lot of interest to have saved by not getting a fixed.

How long will it take me? Well I think the break even point is 55 months (5 years assuming an extra $1k in interest/month). That's 12 years right there, assuming I don't move or make a single extra principal payment in the next 60 months before the rate even adjusts.

So anonymous saver do you really think I'm going to not move in the next 10 years? Hmm..

If anything I'm coming out way ahead by looking long term at my goals, future predictions, and lifestyle. I'm saving about 2% on interest while "renting" my house. I don't own it. Instead more is towards principal.

Plus you don't get wealthy by being debt free. It's not about debt free, it's about net worth. Managing risk and properly leveraging your income/assets/debt.

For example no one buys a house in cash. Why? Because you spend years renting, instead of saving for a house in cash while renting.

I never assumed that you were getting the 9.25% rate... I was only commenting on how I believe it would be a terrible rate IF you get it (or anyone else for that matter). No where did I assume you were going to end up having that rate.

As far as you moving out of your house before 10 years is up... that's really irrelavent to me. I was only commenting on the possiblity.

We just share a different opinion. It's not a big deal.