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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127221  
Subject: Re: financing the next house Date: 2/16/2014 6:25 PM
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CCinOC: "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.

Example:

$750,000 loan amount

Conventional jumbo 30-year fixed rate: 4.30%
Payment: 3711.54
Interest: 2687.50
Principle: 1024.04
Balance after 5 years: 674067

1 month LIBOR ARM: 1.75% amortized over 25 years
Payment: 3088.42
Interest: 1093.75
Principle: 1994.67
Balance after 5 years: 617430

674067 minus 617430 = $56,637 difference!"


You are using two different amortization periods, as a result, I do not believe that the comparison is apples to apples.

Regards, JAFO
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