Re: Interest Rates gamble - 30 yr. fixed vs. 5-year ARM\'s
I took a 5/1 arm last July at 4.somethingorother%, don't remember exactly. My whole thought process was a little different.
We budgeted 2k/month before we started looking (southwest CT). I planned on paying that amount every month regardless of what the actual payment was, and just put the remainder towards principle. My goal is to pay it off in 20 yrs or less.
I don't recall the precise numbers, but a 30yr mtg would have put my payment around $1700, while the 5/1 is around $1450. That extra $250/month that I put to principle will end up knocking off an additional $15k over 5 yrs.
When the 5 years is up, this difference may make it very possible for us to fit into a 15 yr fixed mtg, which usually beat the 30 year rate and the payments aren't drastically different. House paid in full in 20 or less!
Another way to think about this:
How much would you'd save over 5 yrs with the 5/1 arm?
How much would the 30 yr rates have to rise in that 5 year period in order to eat through this savings when you refinance?
Good luck
|