Why The 30-Year Fixed Isn’t The Obvious Mortgage Choice Anymore

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The 30-year fixed rate mortgage isn't such the no-brainer anymore.

After thoroughly thumping the interest rates on an equivalent 5-year ARM since December, the 30-year fixed has reclaimed its honor as "Most Expensive Mortgage Product".  The chart shows the difference as a half-percent, but real-life pricing puts it closer to 1.000%.

Right now, adjustable rate mortgages are very attractive to the right type of homeowner:

• First-time home buyer that expects to move within 7 years
• Has an existing 30-year fixed with plans to move in the next 7 years
• Active home buyer with a pattern of moving every 10 years or fewer

For people meeting the above criteria, locking in with a 30-year fixed rate mortgage may be plain overkill; an expensive insurance policy in the event you don't move or don't refinance within those first 7 years.

How expensive? Over the first 5 years, it's $3,660 per $100,000 borrowed.

Them's big numbers.

But just because ARMs may make financial sense -- psychologically -- they aren't for everyone.  Some folks lose sleep at the thought of a pending ARM adjustment and there is no amount of cash savings in the world that can make up for that kind of dyspepsia. If you fit that description, you know exactly what I'm talking about.

For everyone else, though, take a real good look at today's 5-year and 7-year ARMs. The pricing is attractive and the product could be a real money-saver for you over the long-term -- especially if you know you're not going to need your mortgage for more than 7 years or so.

If you're considering an adjustable-rate mortgage and want to know more about how they work or how they might work for you,anytime.  I'd be happy to help.