Sounds like most of us argue exotic mortgages are bad, so let’s just look at ARMs. To me the open-ended ability for rates to increase is a recipe for disaster but HLS is arguing it can be better if you invest that money.
I’d bet most people don’t have any discretionary income, thus the need for an ARM, but let’s assume they do.
I know it depends on the rates, but let’s use what they are are today.
Over the 30 year life of a loan, what costs more: ARM or fixed? Say it’s a 3-year ARM that started 3 years ago, and just reset. If I recall, a 30yr fixed ends up costing around double the purchase price. What about an ARM?
Won’t the difference come down to what the adjusted ratepayment becomes, and won’t that rate be higher than if it was fixed?
