To illustrate, let's compare a 10/1 ARM with a 2.5% interest rate versus a 30-year fixed mortgage with a 3% interest rate.
In 2014, for example, I got a 5/1 ARM with a 2.5% interest rate. In 2019, the highest it could reset to was 4.5% for one year. The ARM could reset by another 2% in 2020, all the way up to a maximum of 7.5%. Since you have a shorter timeline to reduce debt, you'll be more motivated to pay extra principal every month, quarter or year. The goal is lower your balance by as much as possible before your introductory fixed-rate period is over.
If yields and mortgage rates are rising, it probably means that inflation is elevated because demand is increasing. So even if you have a higher mortgage rate, the value of your home will most likely be higher due to strong demand., but it is also an inflation play. In an extreme circumstance where there is hyperinflation, it is wise to own real assets such as real estate — instead of cash, which is rapidly losing its purchasing power.
MakeIt This is really bad advice, the only way it does make sense is if you sure you will be moving within 10 years.
MakeIt This story paid for by CountryWide and New Centuey Mortgage...
MakeIt Of course bankers want you to get an ARM right now....hey consumers/borrowers....don’t believe their bullshit unless you believe America is going to negative rates. Signing up for an ARM with rates at near zero is one of the most idiotic things you could ever do.
MakeIt Bad advice. Get a fixed rate below 3% and you never have to worry about it changing.
MakeIt Lol!
MakeIt This is the worst and funniest financial advice I have read in a long time. Who in their right mind would get an ARM when rates are below 3%. 🙄
MakeIt an ARM? no.