The Motley Fool Discussion Boards
Personal Finances / Buying or Selling a Home
|Subject: Number Crunching||Date: 2/26/2013 6:33 PM|
|Author: timk777||Number: 124848 of 127220|
I hope this is the "right" board to ask this question. I'm trying to determine how long a 3-year ARM will beat a 5-year ARM if the rate changes 1% after 3 years.
Loan A: $3MM -- 20 yr. amortization -- 3.2% first 3 years -- then resets for another 3 years, etc. until maturity. (Reset = prime + 0.35%)
Let's say, after 3 years, the rate moves to 4.2%.
Loan B: $3MM -- 20 yr. amortization -- 3.6% first 5 years -- then resets for another 5 years, etc. until maturity. (Reset = prime + 0.55%)
Let's say, after 5 years, the rate moves to 4.6%.
Then, after year 6 on Loan A, the rate also moves to 4.6%.
Which loan is better for the first six years? Hoping to repay or refinance after six years.
Thanks in advance for your help,
|Copyright 1996-2014 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us|