I agree it’s quite an open ended question, and I can see how one could benefit from FSD’s situation. I am planning to do a 15yr fixed when I buy, because I envision rates going up, and don’t expect to double my income after I buy within 3 years. 4 maybe :), and I would prefer not to sell, at least until the next bubble.
But I want to make sure my reasoning to go with a fixed is solid, which gets back the original post.
I view ARMs/IO as a way to get more house than you can afford. Omitting the option of selling after rates/payments adjust what would make those worthwhile? A huge increase in pay is about the only likely thing I can think of, and that’s not a guarantee. If you’re not moving, can’t sell or refi (and cover the original loan) because the value went down, shouldn’t you go fixed?
There may be benefits, but with unknown rate changes it’s too convuluded to determine the long run cost comparison. I imagine you would have to have a higher ROI than the highest your mortgage rate could go. That’s the only thing I could see making your money saved with an ARM/IO worth more than paying off a house and having the money later. That of course assumes you could afford a fixed at the time of purchase, and actually invest the savings. Then again, with a higher rate, you may be paying a lot more on the full term than with a fixed.
My buddy is a broker in SD. I’ll ask hi if ARM/IO’s were higher commissions.
