Let them take the hit. Especially since I'm looking for a nice, reasonably priced house myself. :-D
The only way I'd ever take on an ARM is if I had some extra cash flow included in the house budget, and intended on making extra mortgage payments...and I was reasonably sure rates were going to go down and stay level in the next few years. If they rose a little, hopefully I'd still be ahead when the loan re-amortized, if I was making extra payments on principal. In short, I'd have a margin of safety built in. Most of the people taking out those loans, don't.
You never know if you'll be in the same place 5-7 years from now, or what job you'll have. When my ex-bf bought his house, I talked him out of getting an ARM. His brother had bought a house with an ARM ten years back....when rates were still FALLING. His brother also had a much better job and could better afford the risk.
I convinced him to go fixed. Now, the real estate market in the region is starting to stall out a bit, prices are flattening, "for sale" signs are proliferating in his neighborhood... and my ex-bf is currently unemployed, and may have to take a salary hit. Yeah, an ARM-reset in 3 years would've been nasty business for him, especially as rents are still rising quickly there. |
