My house payment decreased by $103 this year.

Interest is now 2.5%.

What happens when they go up?

Sounds like a crap shoot

Mortgage guy I used for many years said he always got ARMs and refinanced after the discounted term ended. He said long term even with rate fluctuations up and down, it always netted lower total outlay than a fixed term.

BUT, you have to pay down principle and not take money out and make sure you are never "underwater" and unable to refinance.

I got 2.75% on a 15 year fixed. I dont see the benefits of an ARM.

In August, I closed on a 2.5% 15-year fixed refinance. At that rate, now way I'd consider an ARM.

My employer moves me every few years, and the closest I've come to an ARM is a 5/1 or 7/1 where it's fixed for 5 years or 7 years then becomes a variable the remainder of the 30 years. I did it because I was 99.99% certain I wasn't going to live in Alaska or SoCal longer than the fixed period. SoCal worked out great because my lender contacted me about 2 years in and converted me to a fixed with a lower rate for free. I'm guessing it wasn't out of the goodness of their hearts but instead their balance sheet needs a certain percentage of mortgages with people with 800+ credit scores and were afraid I'd refi with someone else.

I seriously hope you are being funny. ARM’s are not a good deal most of the time. It still may not be. You’d probably be better off at this time of very low rates to lock in a low rate.

This thread is akin to saying you are glad you market time because this time it worked out.

In the long term ARM’s potential huge downside wildly outweigh 5he bump downward. Seriously. Lock in now on low rates and ditch the ARM.

I got 2.25% fixed on a 30 year mortgage 6 months ago.

No way an ARM would have made sense there.

If it were the bad old days of the early 1980s where 15+% interest on a mortgage was the norm, then an ARM might make sense, basically gambling on the hope that there was nowhere for the rates to go but down.

You can't know whether it was a good decision until the loan is retired.

It's hard to see how the possibility that rates could somehow go lower than the fixed rate numbers quoted above outweighs the probability that they will go higher at some point during the life of the loan.

ARM’s are notorious bad deals for almost everyone. Those things you mention about the idea of refinancing at end of adjustable period is stupid. Yes I said stupid. It’s stupid because you are banking on something that is completely out of your control. You could lose your job, you could get sick, a bunch of things completely out of your hands could happen that make refinancing difficult if not impossible. All to gain a small bump downwards for a short term time frame mortgage wise.

It’s a gamble. A gamble on the single biggest cost in your life. A gamble that if it goes the wrong way can cripple you. To save some money on one end.

Your mortgage guy says what he says because on paper you can save money. He also makes $$$$ on every single guy he convinces to follow his plan. He gets paid whether it’s a good smart play or not. Akin to believing your insurance guy. Do your own research and understand the reality of the risk you are taking.

Suckers bet. There I said it. It works out for some. Not exactly a solid endorsement.

Nope nope NOPE!!!

Never again...

I had an ARM on my first house. Was an absolute nightmare every single time it adjusted or got bundled and sold to another company

2021 can be very scary for interest rates , stock market , 401k's , etc.

quote:

What happens when they go up?

Sounds like a crap shoot

Back in the 80's I saw a large number of homes being lost because of ARM mortgages.

With little in the way of limits the interest rates shot up several points causing the payments to explode.

As stated the difference in rates between a conventional and ARM isn't that great.

Unless the buyer intends on owning for a short time I'd never go that route.

I had one for years and it only went down. Good timing on my part. I never reduced what I paid each month. I got the mortgage paid off early.

Many are predicting inflation to come back over the next couple of years. The massive deficit, huge FED balance sheet, and skyrocketing money supply are all precursors to rising inflation. Why do you think gold, commodities, real estate, and bitcoin are all doing so well? Connect the dots. If we have inflation, interest rates will go up. Beware of variable interest rate debt, in my opinion.

The only way I would ever do an ARM is if rates are at all time highs.

I think you have to be out of your mind to do an ARM loan unless you plan on only staying in your home for a few years.

People with an ARM got killed back in the early '80s. Rates went into the teens, and the high teens at that. What goes down can go up.

I almost got bamboozled into an ARM loan in 2005 when I first bought my place in Park City. I was going with Quicken Loans, and that's what they talked me into. During the loan process though, the appraisal on my place came back under. Absurd considering this is a ski resort town, and I was in fact getting my condo for a steal (the value now is over double what I paid in 2005). This led to discussions with my real estate agent who recommended a local lender who understood the local real estate market. They recommended a 30 year fixed which i ultimately went with and told Quicken Loans to pound sound. The broker I was dealing with there was not happy, some slick talking 20-something year old, but screw him. I would've been absolutely fucked if I did the original ARM loan he was peddling me.

By the grace of God that appraisal came under. Thank the Mother Mary, who knows where I'd be today.

One thing I learned with our mortgage is to verify their math. A couple years into our mortgage I entered all the data into Excel and it seemed like the principal wasn't going down as it should. After a few calls to the bank where they kept saying I just didn't understand how the principal and interest worked, I mentioned maybe we should just let an attorney figure out the math. Suddenly they found over $9000 that was 'suspended' instead of being applied to the loan.

We signed a fixed rate 1.9% 15-yr mortgage in September.

How would an ARM have been better?