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I have an adjustable rate mortgage...

May 21st, 2014 at 05:06 pm

When we bought our townhouse in 2005 we bought using an 7/1 ARM @ 4.25% for $460k. We figured we wouldn't be here in 2012, hahahaha...We're still here in 2014. BUT we've saved a ton in mortgage interest and we've still got an adjustable rate mortgage.

Back in 2011 we refinanced to a 5/1 ARM at 3.125% $416k. A year later in 2012 we refinanced to another 5/1 for 2.625% for $410k. Both times was no cost mortgage, so our rate was higher than if we had paid but it didn't cost us anything to get a cheaper rate.

Our current mortgage caps out in 2020 @ 7.625%. It starts increasing in 2017 @ 2% annually and caps out with a lifetime minimum of 5%. Who knows where rates will be but since we're paying down approximately $800/month or $10k/year we could easily handle the increased interest rate or we could refinance before then. Seriously we've saved a ton in mortgage interest and we've been paying down the mortgage faster because of it.

We have 33% equity in our house now based on purchase price, and with current appraisals/sales I know we're looking at a sale price of $725k-$750k and we owe around $390k so we have about 50% equity and we'll be paying off more the longer we stay put.

The joys/sorrows of living in such a HCOLA. It's an old, tiny townhouse. But it also could be the bedrock of our future plans.

Have you considered an ARM?

4 Responses to “I have an adjustable rate mortgage...”

  1. Petunia in a Flower Garden Says:

    We also had an ARM. I figured out that, if we made extra payments, over time we could reduce our monthly mortgage payment without refinancing. That, combined with a decrease in interest rates, dropped our payment to something that we could easily afford on one income. And that allowed me to stay home with my daughter, which is what I wanted to do.

    The interest rate drop over the time we had the loan was just plain luck. We don't live in a super high COL area but we don't live in a super low COL area either.

    We bought in the mid-90's and paid off the 30 year mortgage in about 15 years.

  2. creditcardfree Says:

    We had an ARM back in the late 90s when we bought our first house. I think it increased 1% a year almost right away and we eventually refinanced. This current home as a 5/1 ARM 2.75%. So it will only start increasing in 2017, and only at 1% a year, up to 5%. ARMS really aren't so bad when rates are uber low! I was not a fan of the one we had in the 90s.

  3. LivingAlmostLarge Says:

    Nope ARMS can be tools for saving money depending on the situation. I once sat next an engineer on a plane ride who explained to me she had a 5 year arm and a goal to pay off her house in five years. It stuck with me and made me think I wonder if I can do that too one day.

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