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The buy down, I think, generally doesn't math out very well, as I recall, so make sure you really run those numbers. An ARM is a gamble on what interest will be 5 years from now (in a 5/5). I have both kinds-- a 30 year at a great percent, an ARM at a great rate, and an ARM at current rate. I love the first, made a mistake on the second to save short term cash, and the third one is a crap shoot. It's a gamble right now. Three years ago, I'd have said rates would be down by now, but historically these rates aren't really that wild. It's a gamble. At least it's a gamble with a cap on how much you can lose and when.
My lender said the arm makes the most sense and the 12k buy down is not worth it (he may be biased bc his credit union offers 6.75% 30y fixed rate), is he right or just trying to position his product? The argument about refi also comes up, but refi would also cost (at 640k remaining of the loan amount, would refi cost be 2-4K, 7k, or 20ish k) thanks in advance I am new to real estate
Seems to be good rates and which lender is this as I am in the market soon for mortgage loan.
The arm is a local credit union in socal
Why do you think rates won’t drop below 5%?
Like I already said, the Fed has made it extremely clear 2 more rate cuts planned for this year. Those are priced in. 6.5% accounts for this. You are not getting another half percent in 2025
If I account for the buy down, over 30y i pay less than with a volatile ARM that adjust every 5y between 5-7%. That said, til year 10, the ARM may be better. Would it be better to refi in year 4-10 assuming interest rates may go down to 5-6% (refi I think is around 7k), or bite the bullet, pay upfront and secure 5.875% with 12k buy down. Lender is TOMO for that option
*(ARM: also consider if you'd be highly likely to move before significant adjustment; so differs between a long-term buy and a short-term buy)
OP: check with ACU, they have 15/15 ARM with 5.6% rate, no points. That will give you way more room for rates to drop. With current economy, it’s a huge gamble with 5/5 ARM. Good luck!!
Ohh, did not know they don’t offer in CA.
Good plan