I did some quick spreadsheeting to see the rough cost differences between these two options I have currently. I’d appreciate it if you guys took a look to point out if I have something glaringly wrong: https://i.imgur.com/RcBWnYW.png.
These are the two 30-year mortgages I have been comparing:
6.000 APR Fixed
3.625 APR 5/5 ARM (2/2/5)
Based on what I can see, the spread between ARM and the fixed mortgage makes it so that the ARM still comes out far ahead well into the life of the mortgage. Even if we say property value stays the same throughout and it costs a fixed 2% to refinance it for whatever reason, the delta between the two balances still leaves “plenty’ of headroom before the fixed mortgage seems like the no brainer. Is there something I am missing?
A side topic for discussion: do you guys think 30-year fixed mortgages will go above 8% in the next 5 years (by 2027)? If you think that is too low, how high do you think it will go? Don’t worry I won’t hold you to it.