Sometimes it makes sense to go with an ARM - for example, when I purchased the house I'm currently in back in 2003, I wasn't sure I'd be here more than 10 years. Went with a 7/1 ARM (fixed rate for 7 years) and at that time the rate was lower than the 30 year rate. I ended up refinancing around the 6 year mark.


However, looking at today's rates, I'm seeing the 15 year fixed rates are at or below what a 5/1 or 7/1 ARM would be. I don't think it makes sense to go with an ARM if the fixed rates are the same or better.


I too have seen others take it in the shorts when rates went up - future MIL had insisted on getting an ARM because "that's what her brother always did" in the past... Except her brother had switched his to a fixed rate a few months before because he thought rates were going to climb. Rates got higher, and that really stressed her budget.

I could re-finance now and get a better rate than I have, but we're planning on moving within 18 months or so (I've run the numbers, the lower rate won't cover the re-fi cost in that timeframe).

I refinance in August at 2.375% for 30 yrs which reduced my payments by $270 per month. We'll keep making the old payment amout and pay down the mortgage.
I did an ARM in 2004 for my 1st house and it ruined me when the market dropped and rates adjusted.
I can't imagine an ARM being a good way to go for anyone right now with rates as low as they are.

quote:

Originally posted by SW_Sig:
We signed a fixed rate 1.9% 15-yr mortgage in September.

How would an ARM have been better?

You are going to want to frame that some day...

quote:

Originally posted by SW_Sig:
We signed a fixed rate 1.9% 15-yr mortgage in September.

How would an ARM have been better?

If the rate goes to 1.0%.

quote:

Originally posted by jhe888:
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.

True, and when rates go up, values will go down, at least for a while. A bad combination for a risky mortgage with a short term refi requirement.
My first mortgage in '81 was at 13.5 APR so anything today looks cheap. By the end of '81 it was around 20% for people with good credit.
Today there's no way I'll be underwater and at the mercy (they have none) of a banker.

quote:

Originally posted by jhe888:

quote:

Originally posted by SW_Sig:
We signed a fixed rate 1.9% 15-yr mortgage in September.

How would an ARM have been better?

If the rate goes to 1.0%.

Not necessarily. Assuming the ARM is .25 basis points above prime/LIBOR, the break even point is 1.65. The rate would have to fall below 1.65 and stay there for more time over the next 15 years than it spent above 1.65 for the ARM to be the better choice.

Is it possible? I suppose-government has no regard for the laws of economics anymore-but the amount of money you stand to gain by a sustained drop to 1.5 or lower is far less than you’d lose if rates ticked up to 2.5, which is still absurdly low by historical standards. I’d take a fixed at 1.9 all day long - by the time you deduct the interest it’s almost free.

Love all of the comments. We have a 7 year ARM on

its last year. I'm not sure what a 15-20 year

rate was then. But a 3.75 ARM was less. The rate

went up once and now it is down. We have always

paid more than the payment, I have considered

paying it off with my/our ROTH. However our

investment in the market (S&P 500) pays more than

the mortgage rate. So it is not logical to cash in

the market investment to pay off the loan.

quote:

Originally posted by George43:
I have considered paying it off with my/our ROTH.

Between this and the subject of the thread, only suggestion I can make is to fire your financial advisor.

Back when I was moving a lot I owned two house for <3 years each. Depending on what direction one felt, I doubt an ARM would hurt much.

I think many financial decisions need to be tailored to the individual, though I can understand generalities.

The last handful of years I leave my home equity be, never consider tapping it. Yes, slightly different issue.

quote:

Originally posted by maxwayne:
I had one for years and it only went down. Good timing on my part.

Same situation here, but there is no way I would go with an ARM today 2.5-2.75 fixed is too good to chance the ARM.

quote:

Originally posted by SW_Sig:
We signed a fixed rate 1.9% 15-yr mortgage in September.

How would an ARM have been better?

Congrats - I have been waiting to know (sort of) someone that secured a fixed rate for under the 2% threshold.

I'd have to concur, fixed rates at todays rates are a no brainer.

quote:

Originally posted by bryan11:
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.

Winner winner chicken dinner!

I thought this thread was going to about somebody who bought a new Apple Mini with the M1 chip.

The first house Mrs. Cooker and I bought, almost 20 years ago, we bought with an ARM, because it was the only way we could finance the house. This was back when they would give a shitty loan to anyone stupid enough to sign on the dotted line.
We saved our asses off, and had a good bankroll to put down when we wanted to refinance. We refinanced just before the rate adjusted.

Had we not been able to refinance, after the rate adjustment, we would never have been able to afford the house.

I am in disbelief that after the housing bubble burst, ARM loans are actually still allowed.

quote:

Originally posted by SW_Sig:
We signed a fixed rate 1.9% 15-yr mortgage in September.

How would an ARM have been better?

Cause your underwriter (who is making boat loads of $$$ on you) said so.

There are so many factors here that we don't know, which is why I hate threads like this, but can't resist commenting.

How old is the OP? How risk averse? How much in the ROTH? Is the home in a "hot" real estate market? Etc.. All unknowns that can determine if this is a solid plan or not.

As far as best decisions, that's a stretch.

If the market tanks and the ROTH would have gone tits up, at least our OP here would have a legitimate asset to his name. I'm assuming that the ARM was originally acquired at a much lower teaser rate than what was available fixed rate at the time.

quote:

Originally posted by Rev. A. J. Forsyth:
There are so many factors here that we don't know, which is why I hate threads like this, but can't resist commenting.

How old is the OP? How risk averse? How much in the ROTH? Is the home in a "hot" real estate market? Etc.. All unknowns that can determine if this is a solid plan or not.

As far as best decisions, that's a stretch.

If the market tanks and the ROTH would have gone tits up, at least our OP here would have a legitimate asset to his name. I'm assuming that the ARM was originally acquired at a much lower teaser rate than what was available fixed rate at the time.

1. 77

2. Moderate

3. $80k

4. Houston Tx.

5. 3.25%

quote:

Originally posted by Graniteguy:

quote:

Originally posted by SW_Sig:
We signed a fixed rate 1.9% 15-yr mortgage in September.

How would an ARM have been better?

Congrats - I have been waiting to know (sort of) someone that secured a fixed rate for under the 2% threshold.

Me too! Is it really true and 15 year fixed can be had for under 2%?