Flip flopped on adjustable rate mortgages after my buddy showed me his numbers

I was dead set on a fixed rate for my first house in Phoenix. Then my friend closed on a 5/1 ARM at 3.2% last July and his payment is $275 less than what I'd pay on a 30 year fixed. He showed me his amortization schedule and the difference in interest over 5 years is like $9,000. Now I'm thinking maybe I should save that money and just refinance before the rate adjusts. Has anyone in a fast growing market actually had the ARM bite them when it reset?

3 comments

3 Comments

the_john12d ago

Did your friend include the closing costs and refi fees in his numbers? That's where ARMs usually get you.

iris_barnes8712d ago

I rolled my closing costs into the loan and it worked out fine.

corap6112d ago

Wait, didn't @iris_barnes87 just say she rolled hers in? That's a slippery slope. I read this one article that said people forget the upfront costs can eat up any savings from a lower rate. If you're rolling in fees, you're basically paying interest on those fees for years. It's a trap if you aren't careful with the math.