I plan on buying my first house soon and trying to find every way to save money. The house costs 47,500 but I'm going to try to negotiate for less, maybe $45,000, and I'll pick up the closing costs.
Anyway my question is:
Is there any difference in the first SEVEN YEARS between a 30 year fixed rate mortgage and a 7/1 ARM?
I ask this because I'm going to try to pay off my mortgage as soon as possible and the rates on a 7/1 ARM are way lower than a 30 year fixed. I have $34,000 in the bank and want to put $20,000 down on the house + whatever the closing costs come to. With putting such a big down payment that is going to make my monthly mortgage payments very low. According to bankrate's calculator, if I had a 7/1 ARM, I would be able to pay off in 2 years 10 months. That's if I add and extra $666.66 dollars per month, which is $8,000 EXTRa per year + my low monthly mortgage payment will only be about $267 and that's with Taxes and Insurance. Even if I did have a set back like having to replace the roof or something else expensive in the first 3 years, I'd still think I would have it paid off way before 7 years in a 7/1 mortgage.
Added (1). Could probably even do a 5/1 ARM
Added (2). Lol I was just compared the 30 year fixed vs the 7/1 ARM and I'd only save like $400ish dollars. I'm guessing that's because I'm paying it off in such a short time that the 4.5% interest rate vs the 3.3 interest rate doesn't isn't that big of a change over a short 3 year mortgage.
Read more: 30 year fixed rate vs 7/1 ARM?
