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30 fixed v. ARM?

What is the typical difference in 30 fixed and say either 5/1 or 7/1 arms
By jenelle.l.lee158547 from NM Feb 10th 2014

if you are planning on selling your property within 5 years I would consider and adjustable mortgage. Otherwise if you plan is to keep your property do a fixed loan. Phil Hills Mortgage Banker 505-792-9313

Feb 10th 2014

Typical difference is the 5 and 7 year loans can adjust after the fixed period based on the index used and margin. The 30 year fixed is fixed for 30 years.

Feb 10th 2014

Hi Jenelle, If you would provide a little more info on what you are looking for, we'd be glad to answer. Are you referring to the difference in rate typically or the difference in the way that the loan behaves over the years? Or do you want pros and cons?

Feb 10th 2014

If you are planning on staying in the property long term, then a 30-year fixed-rate loan is probably your best option. A 30-year loan will give you the peace of mind that your interest rate will not change for the entire life of the loan. However, if you are only planning on staying in the home for 5 or so years before selling then a ARM is a great option. ARMs offer lower initial fixed rates for periods of 5, 7 or 10 years depending on the program. Once that fixed period is over, the interest rate on ARM will adjust to current market rates, which could be either higher or lower depending on the current market. If you get an ARM now, the interest rates will likely be higher once you reach your adjustment period.

Feb 10th 2014

Hi Jennelle,Good advice so far. Something else to consider is that with the interest rate on a 5/1 ARM being about .75% lower than a fixed rate you will build equity faster. Likewise, if you wanted to make additional principal payments during the initial 5 year fixed period you could see your payment decrease at the first adjustment, even if the rate goes up. I'm with a direct lender here in NM and for no charge would be glad to work up some scenarios based on your plans and needs. Please contact me at csparks@pcmloan.com or 505-350-3745. Thank you, Charlie Sparks - NMLS# 195031

Feb 10th 2014

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