The Motley Fool Discussion Boards
Personal Finances / Buying or Selling a Home
|Subject: Re: financing the next house||Date: 2/16/2014 5:09 PM|
|Author: CCinOC||Number: 126819 of 128403|
Thanks for the offer, but a 1-month ARM would make DH crazy.
I can understand that, but for the benefit of other readers...since the 1-month LIBOR ARM recasts each month, more of the fully amortized payment is going toward principal than would the fully amortized payment for a 5/1 ARM, thereby making the 1-month LIBOR ARM as stable as a 5-year ARM and saves interest, too.
$750,000 loan amount
Conventional jumbo 30-year fixed rate: 4.30%
Balance after 5 years: 674067
1 month LIBOR ARM: 1.75% amortized over 25 years
Balance after 5 years: 617430
674067 minus 617430 = $56,637 difference!
A 30-year loan takes until Year 9 and 4 months to get to this point. Most homeowners refinance or move during this period; meaning, they just gave away $57,000 in equity and paid $95,000 over 5 years in additional interest charges.
(2687-1093 = 1594 * 60 months = 95640)
|Copyright 1996-2016 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us|