Is 7 year INT Arm a good or bad idea for purchasing a townhouse?

Question

I plan on living there for 5 years and selling it. Is this a good plan for a mortgage?

Answer 1

i cant fully answer these questions unless i had more information if the fixed int only payment is close to the 7 year arm then i would go with the fixed rate

also most 30 year int only lones are int only for the first 10 years and then the remaining balance is re-ameritized into a 20 year mtg so you might refi that anyway

but again i dont have enough info to really answer this question if you want me to help email me at [e-mail] i am a loan officer so i can tell you the best route to take

Answer 2

I have heard so many sad stories from people who have thought like you. Five years is a long time an many things can change. I assume the INT part of your description means this is an interest only loan. Foolhardy, in my opinon. If you take a look an a 30 year amortization table you will find that you are paying very little principle during the early hears of the mortgage. How much can you reaaly save with interest only? Not much!

The ARM is anther story. Your didn't mention the "cap". I assume it is around an additional 8%. Regardless, economic conditions (both that of the economy and your own) can change much in seven years. It is a crap shoot if you ask me.

Consider strongly the risk/reward ratio on this my friend.

Answer 3

I think that's a great plan. If you only plan to live there 5 years, you will pay the least amount possible without adding onto your mortgage (like if you did an option ARM). You should still walk away with equity in your property after the 5 years that you live there.

Answer 4

If you get this, than be aware that you could actually end up owing MORE at the end of the term. A "regular" Arm might not be that bad of a choice for you, but I worked in this industry for 4 years and cringe anytime someone says something about "interest Only".