If you were eating lunch alone, which would you order, a large pizza or a personal pan pizza?
With a large pizza, you would most likely eat a few slices, and bring the rest home to eat later.
If you opt for a personal pan pizza, you are portion controlled, with no waste and no leftovers.
If you will be in your home less than 10 years, having a fixed rate mortgage could be like ordering
a large pizza for lunch, except you can’t bring home the  additional interest paid from the higher
fixed rate  or keep the “extra years” to use later.
A mortgage rate premium is being paid for the security of a Fixed 30.
Those extra dollars are Un-Recoverable.
Today there are mid-term Adjustable Rate Mortgages that stay fixed for 10 years, as well as 7,
and 5 years. If you move or refinance within a year of the fixed period, you have not overpaid for
security of a Fixed 30 year mortgage.
With fixed rates so low, why would you even consider an Adjustable Rate Mortgage?  
-Because an ARM can help you pay less and save more.
-Because ARM rates are even lower than fixed rates.
-The larger your loan ($300,000.00+) the more dramatic the monthly savings and the
Total Borrowing Cost Savings are over the fixed period.
It’s always an interesting exercise to utilize my Total Cost Analysis and compare a Fixed Rate
and ARM side by side.

When the dollar differences  are in black and white, the most frequent
response is, “Now tell me how an ARM works again.”

The Fixed vs. ARM analysis is a good financial exercise, even if the final decision is a Fixed Rate.
Seeing the differences may allow you or family/friends to save more in the future.

What’s your thought or experiences with Adjustable Rate Mortgages? Leave a comment below.

 
 
 
 
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