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antoinette
boy mamma
Member since 5/05 2975 total posts
Name:
Antoinette
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5/1 ARM for starter home- your thoughts...
We are looking to purchase a home that is most likely going to be a "transition" home for us- I'd say we will be in it for about 4 years max before trading up. That being said do you thinkg an ARM loan would be a good idea. The payments are a dream and if we are moving eventually why not? But I know its riskier- your opinions?+
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Posted 11/30/06 12:19 PM  |
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MegZee
My bunny
Member since 5/06 8777 total posts
Name:
Meaghan
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Re: 5/1 ARM for starter home- your thoughts...
what is the interest rate now?
it adjusts yearly, correct? what is the max the rate can go to?
are you putting any $ down on the house?
any prepayment or refinancing penalty?
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| Posted 11/30/06 12:21 PM |
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lululu
LIF Adult
Member since 7/05 9508 total posts
Name:
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Re: 5/1 ARM for starter home- your thoughts...
If you are planning to move in 4-5 years no matter what, I would go for the ARM. If you think that there is any chance you will stay there much beyond 5 years - i would not go for the arm. Another thing you might want to consider is a 7 yr arm. this will give you a little more flexibility with how long you can stay in your home before the rate re-adjusts.
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| Posted 11/30/06 12:24 PM |
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antoinette
boy mamma
Member since 5/05 2975 total posts
Name:
Antoinette
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Re: 5/1 ARM for starter home- your thoughts...
Posted by Meaghan729
what is the interest rate now?
it adjusts yearly, correct? what is the max the rate can go to?
are you putting any $ down on the house?
any prepayment or refinancing penalty?
We are putting around 30% down, I dont know the rates, Im waiting for my mortgage broker to call me back...
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| Posted 11/30/06 12:25 PM |
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antoinette
boy mamma
Member since 5/05 2975 total posts
Name:
Antoinette
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Re: 5/1 ARM for starter home- your thoughts...
Posted by lululu
If you are planning to move in 4-5 years no matter what, I would go for the ARM. If you think that there is any chance you will stay there much beyond 5 years - i would not go for the arm. Another thing you might want to consider is a 7 yr arm. this will give you a little more flexibility with how long you can stay in your home before the rate re-adjusts.
Im wondering the same, let say we decide to expand cant we just re- fi?
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| Posted 11/30/06 12:26 PM |
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MegZee
My bunny
Member since 5/06 8777 total posts
Name:
Meaghan
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Re: 5/1 ARM for starter home- your thoughts...
The PP makes a good point - maybe go for a 7 year arm to give yourself some flexibility. if you definitely know you are moving in 4 years, an ARM might be right for you - I would ask what they base the rate resets on and what is the cap is.
since you are putting a nice amount down, if house prices decrease you will probably still be ok, so that wouldnt worry me too much.
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| Posted 11/30/06 12:28 PM |
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lululu
LIF Adult
Member since 7/05 9508 total posts
Name:
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Re: 5/1 ARM for starter home- your thoughts...
The risk that you are taking with an ARM is that when the rate starts to readjust, that interest rates are a lot higher and are continuing to rise. So at the 5 yr mark you can decide you are okay with the adjustable rate mortgage and keep it. or you can re-fi for a fixed rate but it will still be at the rate at that time, which may be a lot higher than what they are now....
You are looking at a 5/1 ARM, not a 5/1 ARM IO right?
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| Posted 11/30/06 12:30 PM |
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MegZee
My bunny
Member since 5/06 8777 total posts
Name:
Meaghan
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Re: 5/1 ARM for starter home- your thoughts...
you would have to find out from the lender if there any prepayment penalties (which would be a penalty if you refinance.)
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| Posted 11/30/06 12:30 PM |
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antoinette
boy mamma
Member since 5/05 2975 total posts
Name:
Antoinette
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Re: 5/1 ARM for starter home- your thoughts...
Posted by lululu
The risk that you are taking with an ARM is that when the rate starts to readjust, that interest rates are a lot higher and are continuing to rise. So at the 5 yr mark you can decide you are okay with the adjustable rate mortgage and keep it. or you can re-fi for a fixed rate but it will still be at the rate at that time, which may be a lot higher than what they are now....
You are looking at a 5/1 ARM, not a 5/1 ARM IO right?
yes 5/1 arm
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| Posted 11/30/06 12:36 PM |
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SweetTooth
I'm a tired mommy!
Member since 12/05 20105 total posts
Name:
Lauren
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Re: 5/1 ARM for starter home- your thoughts...
ARMs can work for a lot of people, but I am vary wary of them... sometimes things don't work out like you plan them and you can't move in the time you think you will be able too- and if interest rates start to climb, your mortgage payments can increase drastically.
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| Posted 11/30/06 12:40 PM |
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lululu
LIF Adult
Member since 7/05 9508 total posts
Name:
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Re: 5/1 ARM for starter home- your thoughts...
If you are nervous i would look into the 7/1 ARM and see how much different the payments are.....
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| Posted 11/30/06 12:43 PM |
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Blu-ize
Plan B is Now Plan A
Member since 7/05 32475 total posts
Name:
Susan
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Re: 5/1 ARM for starter home- your thoughts...
Lots of times the rates for 5/1, 7/1 and 10/1 are the same if not very close. If it's within an 1/8th of a percentage pt try to get a 7/1 or a 10/1. 5/1 would make me nervous. You can refinance but your rate my be higher and it costs money to refi. Then you are counting on a certain amount of appreciation so you can extend the house.
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| Posted 11/30/06 1:09 PM |
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bikramaddict
mommy-to-be
Member since 8/06 4376 total posts
Name:
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Re: 5/1 ARM for starter home- your thoughts...
I wouldn't do an ARM. I'd stick to a fixed rate. It may be higher now but who knews what the ARM could adjust to.
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| Posted 11/30/06 1:39 PM |
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Eleanor
LIF Adult
Member since 2/06 2223 total posts
Name:
Ellie
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Re: 5/1 ARM for starter home- your thoughts...
I think it's silly to do a 30 year fixed f you don't plan on stay more than 4 years. The interest you save is incredible (especially in the first 2 years!)
Most ARMs have caps for the yearly increase (like 2%) and a total cap on the entire loan (maybe 4-5% above what the current rate is?)
If things don't work out after 4 years, you can always refinance.
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| Posted 11/30/06 4:17 PM |
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Beth
The Key to your new home....
Member since 2/06 24849 total posts
Name:
Beth
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Re: 5/1 ARM for starter home- your thoughts...
Posted by Meaghan729
you would have to find out from the lender if there any prepayment penalties (which would be a penalty if you refinance.)
this is the most important question to ask- you want to make sure you can re-fi if you need too
also- see if the rate can be locked after a certain period- some loans allow for this
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| Posted 11/30/06 4:26 PM |
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MrsPorkChop
Twinning!!
Member since 5/05 9941 total posts
Name:
Missy
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Re: 5/1 ARM for starter home- your thoughts...
i have a 5/1
its fine. we will move in 3-4 years. the payments are lower.
we will move before the rate starts adjusting
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| Posted 11/30/06 5:27 PM |
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