We’re trying to choose between three mortgage options:
Our broker is confident rates will drop in the next two years and recommends the 7-Year ARM to give us more flexibility. My thought is that the 30-Year Fixed, while a bit more expensive, offers peace of mind in case rates don’t drop. If they do drop, we can always refinance.
What do you think? Thanks for your advice!
Your broker isn’t paying the mortgage—you are. There’s no guarantee rates will drop, and even if they do, refinancing isn’t always advantageous.
I’d go with the 30-Year Fixed. The difference in rates isn’t big enough to justify the risk of an ARM. If rates drop, you can refinance.
Chin said:
I’d go with the 30-Year Fixed. The difference in rates isn’t big enough to justify the risk of an ARM. If rates drop, you can refinance.
What’s the rate difference that makes an ARM worth considering?
@Drew
For me, at least a 1% spread. In your case, the difference in monthly payments is around $50—probably not worth the gamble that rates will drop. I’d rather lock in the 30-Year Fixed for security and refinance later if rates improve.
Go with the 30-Year Fixed. If rates go down, you can refinance.
ARMs are a trade-off between savings now and uncertainty later. If you’re not comfortable with risk, go with the 30-Year Fixed. It’s a safer bet, especially with how close the rates are.
Don’t rely on predictions that rates will drop. Nobody knows for sure. Go with the mortgage you can afford long-term in case rates don’t improve or values decline.
The rates are so close that the safest option is to go with the 30-Year Fixed.
I’d recommend the 30-Year Fixed. People hope rates will drop, but there’s an equal chance they’ll rise. You’re the one paying, not your broker.
Take the 30-Year Fixed. If rates fall, you can refinance.
With such a small difference in rates, I’d stick with the 30-Year Fixed.
Go with the 30-Year Fixed. The market is unpredictable right now, and the risk of an ARM isn’t worth it for such a small rate difference.
If you believe rates will go down, why not go with the 30-Year Fixed? It’s slightly more expensive but offers long-term security.
The 7-Year ARM is fine if you’re comfortable with some risk.
Thinking about the potential future of an ARM stresses me out. The 30-Year Fixed offers peace of mind.
How long do you plan to stay in the house? If it’s less than 7 years, the ARM could make sense. Otherwise, go with the 30-Year Fixed.
Winter said:
How long do you plan to stay in the house? If it’s less than 7 years, the ARM could make sense. Otherwise, go with the 30-Year Fixed.
We’re thinking less than 10 years.
I went with an ARM because I can pay it off quickly or sell before rates adjust. If you’re not in a similar situation, stick with the 30-Year Fixed.
Consider asking about 15- or 20-Year Fixed options. If those aren’t feasible, go with the 30-Year Fixed and make extra payments to pay it off faster.