Finally Man and I have decided to call it quits. I’m fine with it, it’s a mutual decision. However, now I have to get a mortgage. I won’t have any trouble qualifying so that’s not a concern. Here’s my question. My son is in sophomore in high school. He will likely not live with me when he goes to college, so I will want to sell my house in a few years. Is there any advantage to getting an ARM rather that a 20 year (or whatever) fixed? I would roll my taxes and escrow into the loan, can I do that on an ARM?
I am leaving shortly for most of the day but will check back this afternoon to see what you all came up with!
Is there any reason why you wouldn’t look at renting a house if it’s only going to be a few years?
Just the real estate fees and taxes would mean your property would have to appreciate by over 5% in order to break even. In just 3 or 4 years that a tall order.
Your question doesn’t make much sense. Are you talking about buying another house? Or getting a new loan on your existing residence? You also didn’t say where on Earth you are. The answer in Scotland is probably different from the answer in Texas.
In general for most of the US, buying real estate now is likely to be a money loser even over a 10-year timespan. The shorter you own, the more the various transactions costs add to the actual cost of ownership. Buying a house intendedin to sell in 2-3 years is probably a very expensive way to go.
As to taxes & insurance being escrowed as part of your monthly payment, that is equally avialable from your lender regardless of the specifics of the loan (ARM, fixed, baloon, 15 vs. 30 year, etc.)
I believe what the OP is saying is the she is getting divorced, and thus has to take out a new mortgage on her existing already owned home to get her husband off the mortgage & deed.
That being the case if you are certain you are going to move, price a 3/1 vs a 5/1 arm vs a 30 year mortgage, include the fees, and whichever one is cheaper over the amount of time before you move, pick that one. That is, take whatever payment you get times number of months you expect to be in the house, add the fees they charge up front, and compare.
Not escrowing vs escrowing your taxes should be available on any loan type- sometimes not escrowing costs extra up front. (paying your taxes/insurance in full on your own when due).
BTW, speaking as someone who is years out of college, sometimes kids come back during or after college (much as that might horrify parents). Some times it’s out of necessity due to the crappy job market, and sometimes it’s just for a visit (which is why I go home). So don’t be so quick to downsize.
Not least of which is that interest rates have no where to go but higher. The ARM will kick in and payments will go up. Can you afford that?
I really don’t understand why people don’t do a fixed mortgage. A big reason for the current housing mess was the amount of ARM or other non fixed mortgages.
5 yr fixed rate ARMs are available. You have to be realistic about what will happen in 5 years. The rate WILL go up 1% every legal time it can. In today’s market predicting what will happen to rates or housing prices is impossible so it is a big old “it depends”.
I’m in Illinios and I’ve had the house for 12 years. The relationship that is ending has lasted 5 years and yes, I do need to get soon-to-be-ex off the mortgage. And it looks like an ARM might be the way to go.
And where ever I should end up in 5 years, there will always be a room for my son if he bounces back.
Not sure what you mean about rolling taxes / escrow into the loan: do you mean the few months of prepayments of each that we always need to make when taking out a new loan? Then yes, you should be able to as long as the loan amount is supported by the house’s valuation.
Anyway: If you’re truly sure you will be moving within 5ish years then a 5/1 or even a 7/1 ARM might be just the right thing for your situation.
Looking at Wells Fargo right now: 30 year fixed rate is 4.875%, 5 year ARM is 3.25%.
On a 200,000 loan, the fixed rate would give you a payment of 1058.42. The variable would be 870.41 a month. So about 180 difference per month.
Your situation is one where it might be worth going with an ARM vs a fixed rate. HOWEVER - you need to look VERY carefully at the terms and see what it could adjust to in 5 years if you do happen to still be there.
At the end of the 5 years, you’d owe 178,613.51. If your rate then goes to 5.25% then your payment goes to 1070.34.
If you paid 180 extra (making that fixed-rate payment against the variable loan), after 5 years you’d owe 166,903.66 (you’d prepay nearly 12,000 over 5 years). Calculating the payment on that, at 5.25%, your new payment would be 1000.17.
If instead the rate jumped to 7.25% your new payment would be 1206.39.
All these figures were gotten using the amortization calculator at bankrate.com.