Why an Adjustable Rate Mortage Might Be Right For You
I bought a townhome last summer and opted for a 10 year ARM - Adjustable Rate Mortgage. And, I did it for several reasons:
The rate was 3.25 vs. the rate for a 30 year fixed rate loan was 3.875. Going with the fixed rate loan would have cost me an additional $144.76 per month. That’s a cell phone payment!
How long was I going to live in the home? I didn’t do the math then but really didn’t think I’d be living here or even renting the home for more than 10 years.
Fast forward… it’s 8 months later, rates have dropped and I could now get a 30 year fixed rate loan for 3.5%. This time, my payment would have only increased by $59/month – less than my cable bill!
Why did I opt not to refinance and secure the lower rate?
I stopped and figured out in my adult life, I’ve moved on average every 2.3 years. Even in the last 15 ½ years, while I’ve lived in the Metropolitan DC area, I’ve moved on average every 3 years.
I hadn’t stopped to calculate these numbers when I bought the home.
So while moving is not fun… I hate packing up everything. Then it’s finding everything, once I’ve moved….
Then it’s the challenge of fitting what used to fit in the old living space into the new living space.
Once, my new home is all set up, I love it. but I know after awhile, I’ll be ready to move again. Maybe I get bored living in the same place too long. I don’t know for sure. I just know I’m not going to live in the same place for a long period of time.
So what I realized was I didn’t want to refinance, as the chances of me being in the same home for over 10 years probably aren’t going to happen.
I’ll save the extra $59 a month along with the closing fees for the refinance.
If you’re looking at buying a home can you imagine yourself living there for more than 5-7 years? If not, it might be wise to consider an ARM loan. It’s not just about the numbers, it’s about how you live and then you’ll know whether an Adjustable Rate Mortgage might be right for you.
For more info; please contact me at Nancy@nancyheisel.com or 703-919-0254