Adjustable Rate Mortgages


Da_Sperm

Da_Sperm

New Member
As much as these types of loans have gotten the country into a complete mess, I still say the right type of ARMs are the best loan products. Ten years ago, we bought our first house and we had a 7% fixed rate loan. After years of paying this loan, I felt I didn't have the right loan for my needs, so I started researching ARMs. I found out mathematically that I can beat the systems with an ARM.

So on our 2nd house we got a ARMs (5 year fixed, adjust each year for the next 25 years). Here is the terms of the loan.

Rate: 4.5% for 5 years
Adjustment period: Once a year after the first 5 years.
Adjustment Rate: + or - 2% of the previous rate
Adjustment Term: 2.75 + One year T-Bill

When we got this loan, the rate of a 30 year fixed loan was 6%. So I paid the loan like it was a 6% loan. After 2 years, my property increase in value and I was able to DROP the PMI, which was $96 per month, I simply kept paying that amount on the principle each month.

Since I have direct deposit, I get a 1/8% discount on the rate, so my rate has been 4.375%, not 4.5%

Five years later, the loan adjusted on 3/15 to 3.5%. The rate is published on the US Treasury website. http://www.ustreas.gov/offices/domestic-finance/debt-management/interest-rate/yield.shtml.

My mortgage dropped $200 and all I have done is paid the note just as if I signed a 30 year 6% rate from the start. Now, my rate will be 3.375% (with discount) for another 12 months and I'm still going to pay the original amount like it was a 6% fixed rate mortgage with PMI still on it.

If I would have chosen the 30 year 6% fixed rate, I would have had to pay way more to be at my point now on my principle.

Don't sleep on ARMs, they can be your best friend!
 

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That scenario sounds good bruh. :tup: I don't think ARMs are too bad, but the problem occurs when they swing the other way and interest rates climb higher.

I went for a fixed rate mortgage on my home, especially since it's my first one.
 
Braveman12 said:
That scenario sounds good bruh. :tup: I don't think ARMs are too bad, but the problem occurs when they swing the other way and interest rates climb higher.

I went for a fixed rate mortgage on my home, especially since it's my first one.
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Second home...but still went for the fixed rate.......
 
CriTAUcal said:
I'm sure it can be, IF you're knowledgeable on how it can work to your benefit. The average person is not going to know how to work that to their advantage.
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The recession is good for home buyers and people who have ARMs that will adjust during that period since the FED has lowered its rates basically to 0.
 
Getting an ARM = gambling

If you keep that house for the duration of that loan,
Your gamble is no where near over

First off people got ARM’s for a cheaper payment, they didn’t expect
The payment to balloon like most of them do.

Now you say you got an ARM, but you’re paying it like a 6% fixed rate.

That means you didn’t have to get an ARM in the first place.


Now even if I believe you are one of the lucky ones the ARM has worked
Out for, guess what?? since your ARM is adjustable EVERY YEAR for 25 years!!!!


It has to keep working out in your favor every year until the loan is paid.

Are you crazy??

I don’t like those odd.


Secondly if your house grew in value so did the taxes & the insurance if you’re insured for replacement cost & not just amount owned on mortage.

Maybe you're just more of a gambler than me.
 
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Da_Sperm said:
As much as these types of loans have gotten the country into a complete mess, I still say the right type of ARMs are the best loan products. Ten years ago, we bought our first house and we had a 7% fixed rate loan. After years of paying this loan, I felt I didn't have the right loan for my needs, so I started researching ARMs. I found out mathematically that I can beat the systems with an ARM.

So on our 2nd house we got a ARMs (5 year fixed, adjust each year for the next 25 years). Here is the terms of the loan.

Rate: 4.5% for 5 years
Adjustment period: Once a year after the first 5 years.
Adjustment Rate: + or - 2% of the previous rate
Adjustment Term: 2.75 + One year T-Bill

When we got this loan, the rate of a 30 year fixed loan was 6%. So I paid the loan like it was a 6% loan. After 2 years, my property increase in value and I was able to DROP the PMI, which was $96 per month, I simply kept paying that amount on the principle each month.

Since I have direct deposit, I get a 1/8% discount on the rate, so my rate has been 4.375%, not 4.5%

Five years later, the loan adjusted on 3/15 to 3.5%. The rate is published on the US Treasury website. http://www.ustreas.gov/offices/domestic-finance/debt-management/interest-rate/yield.shtml.

My mortgage dropped $200 and all I have done is paid the note just as if I signed a 30 year 6% rate from the start. Now, my rate will be 3.375% (with discount) for another 12 months and I'm still going to pay the original amount like it was a 6% fixed rate mortgage with PMI still on it.

If I would have chosen the 30 year 6% fixed rate, I would have had to pay way more to be at my point now on my principle.

Don't sleep on ARMs, they can be your best friend!
Click to expand...

So do you refi every 5 years with the ARM? If so there is a cost involved with that, how do you factor that into the cost of the loan for 25 years? Why not just get 15 year fix and be done at say 5%?
 
good point maybe he refi'ing every 5yrs :noidea:

there is no way to predict what will happen over 25yrs except
with a fixed rate.
 
Da_Sperm said:
As much as these types of loans have gotten the country into a complete mess, I still say the right type of ARMs are the best loan products. Ten years ago, we bought our first house and we had a 7% fixed rate loan. After years of paying this loan, I felt I didn't have the right loan for my needs, so I started researching ARMs. I found out mathematically that I can beat the systems with an ARM.

So on our 2nd house we got a ARMs (5 year fixed, adjust each year for the next 25 years). Here is the terms of the loan.

Rate: 4.5% for 5 years
Adjustment period: Once a year after the first 5 years.
Adjustment Rate: + or - 2% of the previous rate
Adjustment Term: 2.75 + One year T-Bill

When we got this loan, the rate of a 30 year fixed loan was 6%. So I paid the loan like it was a 6% loan. After 2 years, my property increase in value and I was able to DROP the PMI, which was $96 per month, I simply kept paying that amount on the principle each month.

Since I have direct deposit, I get a 1/8% discount on the rate, so my rate has been 4.375%, not 4.5%

Five years later, the loan adjusted on 3/15 to 3.5%. The rate is published on the US Treasury website. http://www.ustreas.gov/offices/domestic-finance/debt-management/interest-rate/yield.shtml.

My mortgage dropped $200 and all I have done is paid the note just as if I signed a 30 year 6% rate from the start. Now, my rate will be 3.375% (with discount) for another 12 months and I'm still going to pay the original amount like it was a 6% fixed rate mortgage with PMI still on it.

If I would have chosen the 30 year 6% fixed rate, I would have had to pay way more to be at my point now on my principle.

Don't sleep on ARMs, they can be your best friend!
Click to expand...

You should have this mortgage paid off pretty soon if you keep paying it like this and your rate doesn't adjust UP drastically. 5-6 years tops.
 
jag4life said:
You should have this mortgage paid off pretty soon if you keep paying it like this and your rate doesn't adjust UP drastically. 5-6 years tops.
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maybe i don't get it, help me but I have a 15year fix at 5%, Is your loan cost cheaper overall, wouldn't you still end up paying more in interest over the long term vs. the 15 year at 5%?

what is the benifit of doing this for 30 years, not counting the cost to refi everytime. I must be missing something.
 
GSU4LIFE said:
maybe i don't get it, help me but I have a 15year fix at 5%, Is your loan cost cheaper overall, wouldn't you still end up paying more in interest over the long term vs. the 15 year at 5%?

what is the benifit of doing this for 30 years, not counting the cost to refi everytime. I must be missing something.
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They don't refinance every time. The benefit is that you could have a few years where the interest rate is lower than the avg fixed rate at that particular time. The con is that the rate could adjust to a rate that makes the mortgage unaffordable.

If I understand his situation correctly, Sperm pays more than his required mortgage payment, so his principal is being reduced much faster than someone who only pays the required amount.
 
jag4life said:
They don't refinance every time. The benefit is that you could have a few years where the interest rate is lower than the avg fixed rate at that particular time. The con is that the rate could adjust to a rate that makes the mortgage unaffordable.

If I understand his situation correctly, Sperm pays more than his required mortgage payment, so his principal is being reduced much faster than someone who only pays the required amount.
Click to expand...

so after the 5 years, what happens?
 

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GSU4LIFE said:
so after the 5 years, what happens?
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Depends on the terms of the loan, but if you have a loan that adjusts after 5 years, your rate will adjust according to the current market. That means it could go up or go down. The reason there were so many foreclosures was because a lot of rates adjusted UP and made the mortgages unaffordable for those borrowers.
 
Tony,
If the house appreciates, the taxes and insurance goes up also. That has nothing to do with interest rate. MOOT POINT.

Secondly, I have been able to beat the system by paying more toward the principal these first 5 years and then I got lucky and caught the economy in a recession and now my rate is almost as low as it can possibly get.

The ARM is in direct line with the economy. If the economy is horrible, the rate is horrible. If the economy is high, then the rate is high. If the rate is high, then I simply SELL, which means things are on the UP & UP.

This has nothing to do with REFI, although that is ALWAYS an option. It is a risk, however I know people who have lost their house with a FIXED rate mortgage.

If this property was an investment property, I would have just increase my cash flow by $200/month because of the rate drop without raising rent.
 
Da_Sperm said:
Tony,
If the house appreciates, the taxes and insurance goes up also. That has nothing to do with interest rate. MOOT POINT.

Secondly, I have been able to beat the system by paying more toward the principal these first 5 years and then I got lucky and caught the economy in a recession and now my rate is almost as low as it can possibly get.

The ARM is in direct line with the economy. If the economy is horrible, the rate is horrible. If the economy is high, then the rate is high. If the rate is high, then I simply SELL, which means things are on the UP & UP.

This has nothing to do with REFI, although that is ALWAYS an option. It is a risk, however I know people who have lost their house with a FIXED rate mortgage.

If this property was an investment property, I would have just increase my cash flow by $200/month because of the rate drop without raising rent.
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Thanks good info
 
I don't know why people buy homes and purchase a 30 year mortgage. I bought my first home in 2003 with a 15 year mortgage, and I'm kicking myself in the azz because I should've gotten a 10 year. That means I would've had 4 years left on my mortgage with a fixed rate of 5.2%. It's all good because in 9 years I'll "OWN" that home at the age of 39. This means I can take the early retirement and enjoy long vacations with my wife. If your home and vehicles are full paid, what are you working for? You're working for yourself and you'd be living debt free.
 
ROYAL BLUE said:
I don't know why people buy homes and purchase a 30 year mortgage. I bought my first home in 2003 with a 15 year mortgage, and I'm kicking myself in the azz because I should've gotten a 10 year. That means I would've had 4 years left on my mortgage with a fixed rate of 5.2%. It's all good because in 9 years I'll "OWN" that home at the age of 39. This means I can take the early retirement and enjoy long vacations with my wife. If your home and vehicles are full paid, what are you working for? You're working for yourself and you'd be living debt free.
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how does owning ONE house @ 39 = early retirement & long vacations WITH the wife?

Maybe me and my buddies are missing something, we all OWN several houses,
many before even 30 and none of us are in early retirement w/the long vacations???
 
Tony said:
how does owning ONE house @ 39 = early retirement & long vacations WITH the wife?

Maybe me and my buddies are missing something, we all OWN several houses,
many before even 30 and none of us are in early retirement w/the long vacations???
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You're debt free with a roof over your head, no car note, and the income you have is yours to do as you so choose. Living your life debt free is the key to early retirement. I don't know your financial business or how you receive income, but I have HUD homes. In fact, I just faxed my authorization form for direct deposit to the Jackson Housing Authority; they will no longer mail checks starting April 1st......easy money. I'm building a mini HUD empire and by 39 I plan to own 20 "full paid" HUD homes. Multiply $750 rent by 20 homes and tell me if that's enough for early retirement.

Always pay cash for whatever you get and if you can't pay cash for it, then you don't need it. It took me a long time to realize this, but I finally got it. Now if I can just "full pay" this mortgage in less than 5 years I'll be debt free. This is the "ONLY" financial obligation over my head at the moment.

Put one of these on all of your homes, to increase the value, rent it, or sell it fast. Not all homes come with these and this could be the deciding factor in selling your home. http://www.electricgeneratorsdirect.com/watts/10-15kw-standby.php
 
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ROYAL BLUE said:
You're debt free with a roof over your head, no car note, and the income you have is yours to do as you so choose. Living your life debt free is the key to early retirement. I don't know your financial business or how you receive income, but I have HUD homes. In fact, I just faxed my authorization form for direct deposit to the Jackson Housing Authority; they will no longer mail checks starting April 1st......easy money. I'm building a mini HUD empire and by 39 I plan to own 20 "full paid" HUD homes. Multiply $750 rent by 20 homes and tell me if that's enough for early retirement.

Always pay cash for whatever you get and if you can't pay cash for it, then you don't need it. It took me a long time to realize this, but I finally got it. Now if I can just "full pay" this mortgage in less than 5 years I'll be debt free. This is the "ONLY" financial obligation over my head at the moment.
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Been there done that.
Your HUD homes will become money pits. HUD people are not the ones paying
so they don't care about the property, they will destroy it & you will always be reparing something, and before HUD allows you to rent to another
HUD person your property has to reach required standards, And if your not
living in the same state with the property you have No idea of the damage that's occuring from termites to nuccamites.
and 750 lol HUD ain't payin' 750
 
Tony said:
Been there done that.
Your HUD homes will become money pits. HUD people are not the ones paying
so they don't care about the property, they will destroy it & you will always be reparing something, and before HUD allows you to rent to another
HUD person your property has to reach required standards, And if your not
living in the same state with the property you have No idea of the damage that's occuring from termites to nuccamites.
and 750 lol HUD ain't payin' 750
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Brother, I live in Nashville and all of my properties are in Jackson. I don't know about you, but I choose my tenants wisely. No one has tore up my properties, nor have they been a problem to me. One of my tenants called me 2 weeks ago and informed me she put a small hole in the wall. I didn't personally know anyone that does drywall, so I looked on the internet. I called the guy, told him my situation, and he immediately went over and fixed the problem for $65. She's been in that home for 11 months, and that's the first time she called me about a problem. Secondly, I have American Home Shield insurance and it covers appliances, plumbing, heating & ac and etc for a small fee of $55 per month.

The tenants and I have our own agreement, and they understand they're suppose to pay me the difference. I've had no problems. For example, one of my tenants pay me $146 and HUD pays me $604; that's $750 per month.
 
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