ARM Vs. Fixed

[organic]

Hi dear all
I don't know much about mortgage interest rate, please forgive me if my question sounds ignorant.

Recently, I heard my friend commenting on ARM. He said that if you search for a good one, you will overall pay less interest rate with a ARM than with fixed interest rate. I know there is a ceiling as how high ARM could go, but still I wonder if what he said is true for most cases

Could someone shed some light on this?

who would go for ARM? would would opt for fixed interest rate?

Is it better a purchase a home when interest rate is very low, and prices of real estate are skyrocketing high? or is it better to purchase a home when interest rate is a bit higher, but real estate market calms down more? I am sure it all depends on how much money one wants to borrow. But I just found it very interesting and would like to have your inputs on this issue

thanks
any comment is appreciated

---

Members don't see this ad.

 

[mpp]

The only reason to go for an ARM is if you know that you will leave before the fixed period of that ARM expires. You can get a 30-year ARM that has a fixed rate for between 1 and 10 years before it goes adjustable (the shorter the fixed period, the lower the rate of that fixed period). The rate during this fixed period will be lower than the rate on a 30-year fixed rate mortgage.

As far as the interest rate versus price goes, I don't know which would be better. I think the only good time to buy a home is when you want to live in your own home. Then find a home you like that you can afford in an area you like and shop around for the best deal in mortgages.

 

[Seaglass]

I think the only good time to buy a home is when you want to live in your own home.

Truer words have rarely been spoken. Buy a house if you really want a house.

 

[mpp]

I know you were speaking hypothetically but just not give the wrong idea, you'd need a very low interest rate (less than 4%) to pay off $20,000 on $150,000 in 5 years. Don't think you'll find that on a 5-year ARM. Five year arms right now are more likely about 4.75% which would have you paying off about $14,000 in 5 years.