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Old 09-21-2010, 01:18 PM
 
512 posts, read 1,427,558 times
Reputation: 276

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hi,
i recently refinanced my mort. of about 325k at 4% fixed for 15 years.
i plan on paying extra every month which would allow me to pay off the house in about 5 years and 2 months instead of 15.

what i recently found out from bankrate.com is that i 'could have' gotten a 5 year arm at 2% and then adjustable after that. given that i would be paying extra every month, i would have been able to pay off the house a lot quicker (2% difference in interest).

but, of course, who knows what will happen 2 or 3 years down the road....maybe i won't be able to contribute as much as i'd like in a couple of years....then i'd be SOL if i had a 5 year arm.

Any thoughts on this? I haven't been able to find a calculator to show the amortization of a 5 year arm with the adjustable rate after that.
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Old 09-21-2010, 01:33 PM
 
9,803 posts, read 16,104,671 times
Reputation: 8265
You got a good deal.

Quit second guessing.
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Old 09-21-2010, 02:55 PM
 
442 posts, read 738,458 times
Reputation: 258
Default Why?

Why are you so obsessesed with paying off the mortgage? Why don't you take that extra money you have every month and invest it instead of burying it in your house. You have a great rate at 4% so keep that loan and be greatful for the extra cash in your wallet
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Old 09-21-2010, 03:02 PM
 
Location: Georgetown, Texas
107 posts, read 283,488 times
Reputation: 60
There is never a GOOD time to have an adjustable rate mortgage. If you like the home and want to continue living there, be thrilled. Many people would love to be in your shoes.

One of the reasons there are financial issues in our country is due to (ARM) adjustable rate mortgages. No one can ever predict what the future holds, so to say you could of, would of, should of been in a better place…is unrealistic.
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Old 09-21-2010, 03:35 PM
 
Location: San Jose, CA
7,688 posts, read 29,048,141 times
Reputation: 3629
Quote:
Originally Posted by kelly katsus View Post
There is never a GOOD time to have an adjustable rate mortgage. If you like the home and want to continue living there, be thrilled. Many people would love to be in your shoes.

One of the reasons there are financial issues in our country is due to (ARM) adjustable rate mortgages. No one can ever predict what the future holds, so to say you could of, would of, should of been in a better place…is unrealistic.
There was one good time to have an ARM: when rates are extremely high but trending down in the late '80s, early '90s. My parents took advantage of depressed real estate prices due to the interest rates and their payments kept going lower and lower, and they bottomed out this year below 2%!

Getting an ARM in this kind of environment is suicidal.
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Old 09-21-2010, 03:53 PM
 
512 posts, read 1,427,558 times
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Quote:
Originally Posted by midlifeman View Post
Why are you so obsessesed with paying off the mortgage? Why don't you take that extra money you have every month and invest it instead of burying it in your house. You have a great rate at 4% so keep that loan and be greatful for the extra cash in your wallet
well,
i'm already maxing out the 401k and saving cash on the side. I don't want to put more money towards stocks so what's left is paying off the house. that's why i'm obsessed with it! cause when we pay off the house, i can live off of about 25k! the rest would be savings -> retiring early and having fun all the time instead of just some of the time :-D
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Old 09-21-2010, 04:03 PM
 
442 posts, read 738,458 times
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Default ARM's are not bad

Why does everyone assume an ARM is bad?

My 5 year ARM just adjusted downward from 6% to 5%. Sure it's a dumb luck scenarios of timing the market, but even if my payments went up I was prepared to make them. The advantage over the last 5 years is that I had an affordable mortgage and was able to use that extra money in my pocket as leverage to invest. In addition I was able to grow my income in the last 5 years to help pay for any increase in payments. How did I grow my income?...I used that extra money in my pocket to start a business.
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Old 09-21-2010, 04:14 PM
 
28,455 posts, read 84,914,994 times
Reputation: 18723
Default Great injection of reality!

Quote:
Originally Posted by sonarrat View Post
There was one good time to have an ARM: when rates are extremely high but trending down in the late '80s, early '90s. My parents took advantage of depressed real estate prices due to the interest rates and their payments kept going lower and lower, and they bottomed out this year below 2%!

Getting an ARM in this kind of environment is suicidal.

The lenders that first popularized ARM's did not do so to leave people with a "big bag of empty or worse"' they did so because their models predicted that they could entice more people into the market. When those people bought wisely the lender was not at risk of the buyer defaulting and the borrower was getting a home that would work for their plans.

Right now lenders that are offering ARMs really ought to make any borrower all but promise they will not be in the house for more than five years or so, as the odds of higher interest rates and flat appreciation making future refi a losing proposition. Of course there is no reason for lenders to not make money off people the "choose poorly" any more than Las Vegas gives gamblers a "money back guarantee"...

Like they say " bulls make money, bears make money, pigs get slaughtered" -- if obsessing on the lowest possible rate becomes your obsession be prepared for some unexpected event to come by and effectively fire a bolt into the side of your head...
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Old 09-21-2010, 04:35 PM
 
Location: State of Superior
8,733 posts, read 15,872,746 times
Reputation: 2869
Its interesting that Home/housing is starting to come back, building is up once again....I wonder how that will effect interest rates....I say they will be going up...and soon. I know , its too early to tell , but the increase in spending by Big business is the starter , and thats happening now....everything else follows by about 6 months. I will bet material costs are going to increase very soon....I see inflation in our near future....a posiative outlook, I may be the only one who thinks so here , but , thats the way I see it comming.
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Old 09-21-2010, 04:52 PM
 
Location: Houston, TX
17,029 posts, read 30,766,528 times
Reputation: 16259
darstar I tend to agree with you...just looking at my own employer
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