Which mortgage is best for me: 30 year fixed rate or 5/1 ARM?

Question

I am looking at borrowing $500000 and would like to know how to find the best interest rate for the mortgage.

Answer 1

ARM typically will have a lower introductory interest rate. If you definitely plan on selling your home within 5 years, then an ARM would probably be the choice for you.



After the 5 years, however, the rate may jump into double digit percentages, which can be a shocking surprise.



A 30-year fixed rate has the advantage of always knowing you'll have the same monthly mortgage payment all the way. It typically will have a higher interest rate than the ARM.

Answer 2

If you are not going to stay at the place for 30 years, then it's no point of getting a 30 year fixed. Depending on how long you want to keep your house, you can consider 5/1, 7/1, or 10/1 ARM.