Quote:
Originally Posted by sonu200333
$600,000 12-15 years.
7 ARM @ 3.125%,
10 ARM @ 3.5%
30 year 4.125%.
I calculated if in 7 ARM I pay payment same as 30 year I'm paying principal 46k more while in 10 ARM 29k more in 7 years.
rates and may not happen again.
I'm buying home at almost market peak so not sure if home price will drop or same in next 7 - 10 years to refinance.
Though I'm planning to reduce principal as much possible till my ARM rates are fixed, by any chance if interest rates go up till 8% cap of ARM, will my reduce principal help me.
understand risk and gain go together but looking for expert foresight, will this 30 year fixed rate of 4.125% is run away rate that make it right choice to go with it and ignore perks of ARM. Or, ARM approach with reducing principal faster sounds good plan, in that case which one of 7/1 ARM @ 3.125 or 10/1 ARM @ 3.5% seems wiser.
With ARM my goal would be to refinance at any opportunity I see to refinance with in fixed rate period.
Fees are equal on all the loans. After Adjustable period its +/- 2% every year till max cap of 8%.
I buying bigger home more than I need right now in good school district, good neighborhood. However I have long time before my child even go to elementary school. So considering all factors what mortgage option seems wiser to you?
Thanks
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Your finance period should match how long you might keep the property, you are buying bigger than what you need now, then you are buying for the future. What is your goal in 10-15 years, buy up or buy down when you move.
In year 8, if you spent $15,000 in fees/discount points do you think you can get a 3 year ARM at 3.5?
In year 11 do you think you can spend $40,000 to get a rate lower than 4.125% for the next 20 year?
You figured out your savings, so you know the amortization, do you think in 10 years, your home will be worth at least $537K?
With ARM my goal would be to refinance at any opportunity I see to refinance with in fixed rate period - How low will the rate have to get for you to do this?
The 4.125 is a very low rate, you should not expect it to be lower for a 30 year product Rates for a 20,15, or 10 might be lower than 4.125 down the road, but who knows.
I think the 10 year is the best bet because in year 11, you would be closer to refinancing into a non jumbo loan.