Q: Jerry, I would like to buy a 150,000 house with about 10,000 on down payment. Is it a good idea to get the 3 year arm or 5 arm loan and refinance after 3 or 5 years?

Thanks,
Joe

 

A:  Dear Joe:

There are three circumstances that I would consider a 3 or 5 year ARM.  First, if you think that you will be in your home for a short period of time, it makes little sense to pay a premium rate for a 30 year fixed if you are only going to use the loan for 3 to 5 years. Secondly, I would consider an ARM if you think that interest rates will decrease during the fixed period of your ARM, not a good bet in today's low interest rate environment. Finally, an ARM is a good option for people who want or need a lower mortgage payment and are willing to take the risk of a higher mortgage payment later.  If you feel that your financial position may be better 3 to 5 years down the road, you may be able to get away with purchasing a more expensive home now and refinancing to a 30 year fixed at a later date.  As always, I recommend discussing your situation with a qualified mortgage consultant that is well versed in all of the options available to you.  For more information call 314.787.2900 or www.midwestmortgagecapital.com.  Best of luck to you,

 

Jerry