[quote=briansd1][quote=AN]Today, we’re at 50+ years low, do you think it’s as wise to go with ARM as the 1980s, when you were above historical average?[/quote]
I think it depends on your holding period. If you want to buy for 7 years and then move up, then I think an ARM might be the way to go.
The difference between 4% and 2.75% is huge in terms of percentage. Maybe go with the ARM and put the difference towards paying down the principal.
I think that rates will stay low for the next 5 years or so because that’s how long it will take the western economies to work out the debt overhang. By that time we would have had our own lost decade of slow economic growth.
IMO, as long as economic growth does not get stronger, central banks will work extra hard to keep rates low.
I think that 1963 to 1983, roughly a two decade stretch, was a different kind of economy. Population growth was strong. People were buying cars and new technology. The babies boomers were moving to the suburbs, installing central air, and enjoying things their parents never had growing up.
Anyway, time will tell… in 5 to 7 years, we can look back just for fun.[/quote]
I agree with you that it all depends on your desired holding period. If you plan to hold for only 7 years, getting a 7/1 ARM is almost like getting a FRM, since rate won’t change for you at all. Even if rate goes down, you won’t get the lower rate. Unless you’re talking about getting a 1/1 ARM.
You say rates will stay low for the next 5 years, but you didn’t say wether it’ll be lower than it is today or higher and what’s consider low? Considering historical average is ~8%, isn’t anything <8% considered low?
I agree that as long as economic growth doesn't get stronger, the central banks will work extra hard to keep rates low. For our sake, I hope we will get stronger economic grow soon. It would suck for a lot of people if we continue what we're seeing today for the next 5-10 years.
Kids have always and I would assume will always enjoy things their parents never had growing up. Just look at kids today, they're enjoying smartphones and tablets. Their parents never had such things growing up, even if their parents were billionaires.
BTW, serial refinancing isn't always a bad thing, especially if you get a credit back.
