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Old 03-14-2008, 04:10 PM
 
133 posts, read 449,127 times
Reputation: 87

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I can get an ARM from my credit union with a 4.25% rate for 2 years, it can go up only 1% each 2 years, max 8% increase, after initial (teaser?) rate, its 2.25+T-bill for interest.

Is this worth seriously considering in light of a 6% fixed or a 5.25% 15-year?

I have no idea how long I will be in the house for.

Also, the ARM only has a 1/4% origination fee...is this odd for an ARM?
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Old 03-14-2008, 06:51 PM
 
Location: Charlotte, North Carolina
5,137 posts, read 15,093,116 times
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get the 15yr fixed.....some places are offering it at 4.875% with 1 origination fee.

it's fixed, and you will payoff the mortgage in half the time.
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Old 03-15-2008, 06:27 PM
 
133 posts, read 449,127 times
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Default any other comments?

I am very curious what you all have to say about ARMS in light of the mtg mess now
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Old 03-15-2008, 08:11 PM
 
Location: Great State of Texas
86,093 posts, read 69,870,497 times
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GO WITH FIXED

(yes I yelled it).
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Old 03-15-2008, 09:53 PM
 
Location: Utah
1,455 posts, read 3,493,802 times
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I wish we had gone with fixed.

Yeah, "supposedly" ours couldn't go up more than X each year after the ARM...BUT, the day after we closed our loan, the mortgage was sold to another company. And since the ARM ran out, it has been sold several times.

It is now 4 1/2 years later. About the same time the ARM was expiring, we had a terrible time financially (and every other way!) which prevented us from being able to re-fi. From our first mortgage payment until now our payments have almost DOUBLED. We were late (by a month) about 3 times during that bad time, and two years ago I caught us up 100%, paid all late fees and their interest, And we started paying a month ahead. So how can they justify that drastic increase??

You don't know where you and your credit will be when your ARM expires, but you know that rates are low NOW.
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Old 03-15-2008, 10:25 PM
 
Location: Chaos Central
1,122 posts, read 3,608,293 times
Reputation: 893
Quote:
Originally Posted by SamNC View Post
I am very curious what you all have to say about ARMS in light of the mtg mess now
They were financial suicide in the 80's. They've ruined countless people in the past few years and will continue to do so over the next couple of years. Frankly I don't see why any regular homebuyer would want to walk into this trap.

If the bank gives me an ARM I expect them to come back for a LEG in a few more years.

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Old 03-16-2008, 01:31 AM
 
Location: central, between Pepe's Tacos and Roberto's
2,086 posts, read 6,096,673 times
Reputation: 952
I'd say that it depends heavily on what your short term goals are. I would definitely advise against a 2 year ARM, just not enough time for it to be worth it. Definitely no guarantee that you can refi in 2 years. However, if you are only planning on holding for 5 years or so, and the money saved would be better off working for you (invested) then a 7/1 interest only could be a viable option, but nothing definitive without more info.
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Old 03-16-2008, 07:50 AM
 
133 posts, read 449,127 times
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Default thanks

I understand what you are saying. I was always nervous about the concept of unknowns. thanks!
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Old 03-16-2008, 01:23 PM
 
Location: Cary, NC
1,036 posts, read 3,627,137 times
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Quote:
Originally Posted by SamNC View Post
I understand what you are saying. I was always nervous about the concept of unknowns. thanks!

And that is important in yoru decision. An ARM is not for someone who is risk adverse. What good is saving a few bucks if you are going to toss and turn at night worrying about your mortgage?

I never liked 2-3 year ARMs, too many variables could change and hurt the homeowner. 5-7 year ARMs give people some cushion, but again it all depends on their intentions and financial goals.

It's the same when people decide to invest in the stock market. Some people will chose blue chips and others will chose risky startups. Its about risk/reward and your tolerance.
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Old 03-16-2008, 01:30 PM
 
Location: Burlington VT
1,405 posts, read 4,305,398 times
Reputation: 539
I can't imagine why anybody would choose an Adjustable Rate Mortgage when fixed rates are this low. If there was a bigger difference between the fixed and the variable, and you were certain to be selling the house before it adjusted I could understand...but not now...The prevailing fixed rate mortgages are just too low to make ARM attractive.

If you're still considering it, please consult an accountant first - even your tax preparer if you have a really good one who you've had a fairly long relationship with.

David Beckett
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