The spread between fixed rate products and ARM's continues to widen.
About 2 months ago the difference between the two was very small and so it was almost always better to just go with the 30 year fixed. Now that has changed...
First off, what is an ARM? An adjustable rate mortgage or ARM is a mortgage product that is fixed for a certain period of time (1, 3, 5, 7, 10 years). They typically offer a lower interest rate than 30 year fixeds (especially now). They are also still amortized over a period of 30 years.
These get a bad rep in the media and by loan officers sometimes. It seems it is the same loan officers that 3 years ago said finance into a low 3 year ARM. They are now saying get out of that ARM and finance into a 30 year fixed. Whatever they can do to get more business...
Anyhow ARMs are good if you know you are only going to be in a house for a short period of time. If you are thinking say 4 years max than get a 5 year ARM and you will then end up paying a lot less in interest over the time you have your mortgage. You don't need that rate fixed for 30 years because you won't be there for 30 years.
If you are not sure what your future holds get a 30 year fixed, it is safer, but that security comes at a price.
About 2 months ago the difference between the two was very small and so it was almost always better to just go with the 30 year fixed. Now that has changed...
First off, what is an ARM? An adjustable rate mortgage or ARM is a mortgage product that is fixed for a certain period of time (1, 3, 5, 7, 10 years). They typically offer a lower interest rate than 30 year fixeds (especially now). They are also still amortized over a period of 30 years.
These get a bad rep in the media and by loan officers sometimes. It seems it is the same loan officers that 3 years ago said finance into a low 3 year ARM. They are now saying get out of that ARM and finance into a 30 year fixed. Whatever they can do to get more business...
Anyhow ARMs are good if you know you are only going to be in a house for a short period of time. If you are thinking say 4 years max than get a 5 year ARM and you will then end up paying a lot less in interest over the time you have your mortgage. You don't need that rate fixed for 30 years because you won't be there for 30 years.
If you are not sure what your future holds get a 30 year fixed, it is safer, but that security comes at a price.
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