5 Year ARM vs 30 Year Fixed : Which is better and Why?

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panda

panda

Well-known member
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There is one ambitious guy in California I know who swears by 5 year ARM. You can see is paydown schedule on his primary residence by his age target and he recently refinanced his 5 year ARM at a rate of 2.375%. Today I am seeing rates of 3.75% for investor 30 year fixed and 3.25% for primary 30 year fixed. 40% of his networth is allocated in real estate.

For those of you who have 5 year ARMs, what was your strategy of going this route? Many people don't live in the same home for more than 7 years.

I do like 30 year over 15 year fixed as there is always a way to pay off your 30 year fixed in 15 years, but not the other way around.
 
Your chart doesn't have much to do with your topic. A better chart would show forecasted interest rates and break-even points between common mortgages (5/1, 7/1, 15yr, 30yr)
 
Panda,

When a 28 year old can buy 1.5 MM real estate with 20% equity, and earns enough to carry $5-6k monthly housing costs, that person is well on his/her way to decent retirement regardless. Provided the money is not mishandled.
 
Cornflakes said:
Panda,

When a 28 year old can buy 1.5 MM real estate with 20% equity, and earns enough to carry $5-6k monthly housing costs, that person is well on his/her way to decent retirement regardless. Provided the money is not mishandled.
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At 28 I was lucky that I was able to afford a $500k condo.  haha
 
places with metered parking will have meter maids that check if you have the front license on or not.
 
I think if you are younger, an ARM makes sense as your earnings should go up to mitigate future risk.

Additionally, the chance you move in 5-7 years is much higher than when you are in your late 30s+.

In any case, just make sure you can afford your payments.
 
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