Mortgage questions

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Topic Author
Sho
Posts: 432
Joined: Wed Nov 24, 2021 8:38 am

Mortgage questions

Post by Sho »

We are under contract
Is taking a 5 arm too risky ? The mortgage will be 1x salary after selling current house . 5 arm would be roughly 5.5 vs 6 percent for 10 arm

Anyone who got a mortgage recently and knows a good lender
please let me know . Thank you
bombcar
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Joined: Sun Aug 12, 2007 6:41 pm

Re: Mortgage questions

Post by bombcar »

Risk is a question for you.

Are you willing to continue living in the house if the arm adjusts up? How much can it adjust each time?

If you're planning on living in this house 20+ years you may consider just getting the standard 30 year fixed, you can always refinance later if you want.

Good lenders depend on many considerations, and may not be able to lend in all areas.
Topic Author
Sho
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Re: Mortgage questions

Post by Sho »

bombcar wrote: Sun May 28, 2023 11:35 pm Risk is a question for you.

Are you willing to continue living in the house if the arm adjusts up? How much can it adjust each time?

If you're planning on living in this house 20+ years you may consider just getting the standard 30 year fixed, you can always refinance later if you want.

Good lenders depend on many considerations, and may not be able to lend in all areas.
Good point
At least would like to live for 10 years
Worst case scenario , can sell stocks and pay off the mortgage if rates go up dramatically . Need to find more details about the adjustments . Thanks
MikeG62
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Location: New Jersey

Re: Mortgage questions

Post by MikeG62 »

Sho wrote: Sun May 28, 2023 11:10 pm We are under contract
Is taking a 5 arm too risky ? The mortgage will be 1x salary after selling current house . 5 arm would be roughly 5.5 vs 6 percent for 10 arm

Anyone who got a mortgage recently and knows a good lender
please let me know . Thank you
In my opinion it is not too risky. My daughter and SIL are currently shopping for a home, and my advice to them has been (if they find something in this current rate environment) to take an ARM and refinance down the road when *I believe* fixed rate mortgages will be more attractive than they are now. I would go with the 5yr ARM if in your shoes. I believe you will have lots of opportunity to refi to a fixed rate mortgage well before the first rate reset on the 5 year ARM.

Mortgage at 1X salary also seems quite affordable too.
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Outer Marker
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Re: Mortgage questions

Post by Outer Marker »

I would go 15 year fixed, which should be affordable for you at 1x salary, offer a lower rate, and chip away more aggressively at the principal balance which is not desirable to hold at today's rates. Vanguard's 10 year outlook is 4-6% for U.S. equities, so paying down the mortgage is as or more attractive than investing in equities at the moment. And, you never have to worry about the reset.

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RJC
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Re: Mortgage questions

Post by RJC »

Is there an option for a 7-year ARM? For us, 5 years seemed too fast while 10 years was a bit conservative.

Just my feeling but I think the rates will slowly go back down again within 4-5 years.
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yatesd
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Re: Mortgage questions

Post by yatesd »

I have done (2) mortgages with 7 year ARM’s and it has worked out very well for me. Statistically, you are probably at least 50% likely to either refinance or sell during that period. I would look at the annual increase maximum per year. Example: even if it allowed max 2% per year increases after 7 years it would give you time to make other decisions.

5 years might be fine, if the savings are significant enough, but I also prefer 7 years if available.
Topic Author
Sho
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Re: Mortgage questions

Post by Sho »

Thank you all. Will try to reach the lenders tomorrow .
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DeliberateDonkey
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Re: Mortgage questions

Post by DeliberateDonkey »

At 1x salary, I would shop for the cheapest mortgage to originate, rather than focus too much on the rate. Regardless of whether it is fixed or adjustable, it's hard to justify carrying a mortgage at today's rates any longer than you have to.
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hand
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Re: Mortgage questions

Post by hand »

Sho wrote: Sun May 28, 2023 11:10 pm We are under contract
Is taking a 5 arm too risky ? The mortgage will be 1x salary after selling current house . 5 arm would be roughly 5.5 vs 6 percent for 10 arm
Do you have the ability to substantially pay off the mortgage in 5 years if interest rates continue to increase? If so, an ARM could make sense - you win if rates stay the same or decline, and can afford to prevent losses by paying off if rates increase.

A 30 year fixed costs a little more, but you win if rates increase, and are likely to be able to refinance for minimal cost if rates drop.

Making a decision based on your resources, time horizon in the house and risk profile - making a decision based on a guess at future interest rates is a fool's game.
6bquick
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Re: Mortgage questions

Post by 6bquick »

DeliberateDonkey wrote: Tue May 30, 2023 12:04 am At 1x salary, I would shop for the cheapest mortgage to originate, rather than focus too much on the rate. Regardless of whether it is fixed or adjustable, it's hard to justify carrying a mortgage at today's rates any longer than you have to.
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Topic Author
Sho
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Re: Mortgage questions

Post by Sho »

Thank you all for the replies
These are the quotes for today

5.35 for 5/1 and 5.85 for 10/1 , 7.25 for 30

Max 2 percent per year after that , max 5 percent

I can bring down the mortgage to 270 K in 5 years

Just thinking between 5 and 10 arms
TravelforFun
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Re: Mortgage questions

Post by TravelforFun »

Sho wrote: Mon May 29, 2023 12:08 am
bombcar wrote: Sun May 28, 2023 11:35 pm Risk is a question for you.

Are you willing to continue living in the house if the arm adjusts up? How much can it adjust each time?

If you're planning on living in this house 20+ years you may consider just getting the standard 30 year fixed, you can always refinance later if you want.

Good lenders depend on many considerations, and may not be able to lend in all areas.
Good point
At least would like to live for 10 years
Worst case scenario , can sell stocks and pay off the mortgage if rates go up dramatically . Need to find more details about the adjustments . Thanks
What if the market is down and the arm goes up drastically? I'd go with the fixed rate.

TravelforFun
twh
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Re: Mortgage questions

Post by twh »

I recently got a mortgage. 5/1 was too short time frame for my liking. I went with 10/1 figuring I'd either pay it off by then or refinance if rates become a lot more favorable.
vested1
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Re: Mortgage questions

Post by vested1 »

Tough call, I wouldn't want to be in the hunt for a mortgage right now. 7.25% is hard to swallow, but for an increase of only .5% for a 10 year ARM as compared to a 5 year I would think the 10 would be a bit safer if you plan on living in the house for the next 10 years.

It could be worse (and may get there).

When I married my current wife almost 31 years ago she had a 30 year fixed on her 2 bed condo that was too small for us and our blended family with 3 kids. Her mortgage was 14.1% so we refinanced it with a 5/25 arm (balloon payment after 5 years fixed) at 5% with the intent to sell ASAP. It took over a year to sell and sat empty while we rented a larger house. The real estate market was soft and we eventually sold it to the only bidder, but basically lost her down payment. Within a few months we bought a larger home with a 5% down payment using my VA loan at 5.25%. When we sold that house 25 years later we were paying 4.25% fixed after a refi.

Can't imagine paying an interest rate of 14.1% now, but it's prudent to remember that rates can go even higher than that if something hits the fan.
lakpr
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Re: Mortgage questions

Post by lakpr »

twh wrote: Wed May 31, 2023 12:44 am I recently got a mortgage. 5/1 was too short time frame for my liking. I went with 10/1 figuring I'd either pay it off by then or refinance if rates become a lot more favorable.
This is exactly what I would advise to the OP. Get a 10/1 ARM, and pay it down like you are obsessed.
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