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Author: 2gifts 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 127473  
Subject: Re: financing the next house Date: 2/7/2014 3:00 PM
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Depends on the terms of the ARM. There are 2/2/5 ARMs and 5/2/5 ARMs. If the OP thinks rates will shoot up, he's better off getting a 2/2/5 ARM that limits the increase on the first Change Date to 2%.

Both programs through my credit union are comparable. The 3/1 has 2/2/6 caps, and the 5/1 has 2/2/5 caps. And now that you mention that this could have had a bigger increase in the first year, I see that that is how the 7 and 10 year ARMs are structured. I hadn't noticed that because I wasn't looking at terms that long, and the 2/2/5 caps are what I have seen for most programs, and similar to the last ARM that we had many years ago. Nice point, though, and it made me go back and look, so thanks.

I hadn't considered that the difference was so little, but the 5/1 looks better for us so that DH is not so worried that the rate will go up in 3 years. This way, we have more time before we have to move or sell the house prior to a rate increase, although we can still afford it even at the higher rate.

I really think this is the way for us to go to reduce our risk because the payments will be about 1/3 of what they are now, and it won't really change our timetable. DH and I will talk about it more this weekend.

Anything else that folks can think of to be considered? Any other suggestions on accomplishing my goal?
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