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Rainmaker
849,106
Pete Xavier
Investments to Luxury - Pacific Palisades, CA
Outstanding Agent Referrals-Nationwide

For me it would be the time value of money benefit, did something comparable, I borrowed against a HELOC to make another property purchase. I had other cash, but it was best to use the other cash for business purposes. 

There are other good reasons to consider an adjustable loan over fixed... relatively short ownership period, expected windfall in the near future to cover the debt, etc.

 

May 28, 2018 11:39 AM
Rainmaker
4,099,156
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

A good dialogue between a buyer and his/her/their loan agent.

May 28, 2018 11:28 AM
Ambassador
2,570,787
Fred Griffin Florida Real Estate
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

  When prices are on the rise, and interest rates are climbing, and you only expect to live in the property for a couple of years.

May 28, 2018 01:04 PM
Rainmaker
166,398
Jerry Thomas-Construction Loans
Cranbrook Loans - Farmington Hills, MI
Construction Loans in MI, OH, VA, GA and FL.

It can be. I bought my house in 2003 and got a 5/1 Arm at 5.625%, about 1% lower than a fixed. The first adjustment it stay close to the 5.625% and after that I haven't paid more than 4.25% and spent a lot of time in the 3's. Never had to pay to refi.

May 28, 2018 01:21 PM
Rainmaker
529,195
Diana Dahlberg
1 Month Realty - Pleasant Prairie, WI
Real Estate in Kenosha, WI since 1994 262-308-3563

I would speak with a trusted Lender ... but most often an adjustable rate mortgage is used when you are not planning to stay with this property very long ... And you can usually get a lower rate ... but remember, it's "adjustable" -- that means it can go UP or DOWN.

May 28, 2018 01:04 PM
Rainmaker
1,921,264
Anthony Acosta - ALLATLANTACONDOS.COM
Harry Norman, REALTORS® - Atlanta, GA
Associate Broker

Great questions for a loan officer.

May 28, 2018 05:18 PM
Rainmaker
1,736,068
Carol Williams
Although I'm retired, I love sharing my knowledge and learning from other real estate industry professionals. - Wenatchee, WA
Retired Agent / Broker / Property Manager

There are several circumstances where an adjustable rate would be advantageous because the starting rate is lower than a fixed rate. 

I've used that strategy effectively to save money when I knew I would be selling before the adjustment period. 

This is a good question to ask a loan officer to discuss based on your individual financial circumstances.

May 28, 2018 01:01 PM
Rainmaker
5,571,886
Barbara Todaro
RE/MAX Executive Realty - Retired - Franklin, MA
Previously Affiliated with The Todaro Team

of course, you would discuss this topic with your lender, but in my opinion, it would be best if you definitely knew you would be staying at the property for a very short period of time....I'd get the lowest rate possible....

May 28, 2018 11:39 AM
Rainmaker
4,116,764
Nina Hollander, Broker
Coldwell Banker Realty - Charlotte, NC
Your Greater Charlotte Realtor

When it makes financial sense.

May 28, 2018 11:26 AM
Ambassador
3,055,926
Kathleen Daniels, Probate & Trust Specialist
KD Realty - 408.972.1822 - San Jose, CA
Probate Real Estate

What Pete Xavier with AffordablePlan.org said.

May 28, 2018 02:00 PM
Rainmaker
6,606,233
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

When it best needs the needs of the borrowers. 

May 28, 2018 01:15 PM
Rainmaker
1,230,031
Thomas J. Nelson, REALTOR ® e-Pro CRS RCS-D Vets
Big Block Realty 858.232.8722 - La Jolla, CA
& Host of Postcards From Success Podcast

Anonymous

May 28, 2018 12:37 PM
Rainmaker
4,433,693
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Nina has answered.

May 28, 2018 11:33 AM
Rainmaker
684,615
Peter Testa
Nationwide Homes - Danbury, CT
PETER TESTA

When you don't plan to live there longer than the fixed rate term of the ARM 

May 29, 2018 04:44 AM
Ambassador
4,256,943
Debe Maxwell, CRS
www.iCharlotteHomes.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
The right Charlotte REALTOR!

When you plan to reside or owe on the property for less than the number of years on the ARM.

We have interns who are buying and know they will only reside in Charlotte for a 2-4 year timeframe, will get a 5-year ARM to save significantly on the fixed interest rate.

May 28, 2018 09:22 PM
Rainmaker
514,124
Dan Tabit
Keller Williams Bellevue - Sammamish, WA

When the borrower doesn't expect to be in the home much if any longer than the rate is set before the adjustments begin and the difference in rate is enough for the borrower to take the risk something will change. 

For example a 5/1, 7/1 or 10/1 ARM makes sense for someone living in the home for 5, 7 or 10 years or just slightly longer provided the rate difference compared to a 30 year fixed, is enough.  

Frankly, only a lender with complete file and rate sheet should advise the buyer. As Agents, we can listen, learn and support their choice or refer them to someone else if the information they are receiving is suspect. 

May 28, 2018 06:30 PM
Rainmaker
1,707,423
Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

Wisdom not required.

May 28, 2018 06:21 PM
Rainmaker
3,466,115
John Pusa
Berkshire Hathaway Home Services Crest - Glendale, CA
Your All Time Realtor With Exceptional Service

Many great responses.

May 28, 2018 05:42 PM
Ambassador
5,408,079
Bob Crane
Woodland Management Service / Woodland Real Estate, EXP - Stevens Point, WI
Forestland Experts! 715-204-9671

When you are likely to move in the first few years.

May 28, 2018 07:13 PM
Ambassador
3,986,710
Debbie Reynolds, C21 Platinum Properties
Platinum Properties- (931)771-9070 - Clarksville, TN
The Dedicated Clarksville TN Realtor-(931)320-6730

When rates are high and you expect the market to come back down and don't want to be stuck in a higher rate.

May 28, 2018 05:34 PM
Ambassador
4,579,055
Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude

It's definitely a discussion to have with your lender, but if you know you are going to be selling the home before the adjustment time frame, it could be a benefit. But stuff happens.

May 28, 2018 04:44 PM
Rainmaker
1,387,173
Ryan Huggins - Thousand Oaks, CA
https://HugginsHomes.com - Thousand Oaks, CA
Residential Real Estate and Investment Properties

For long term hold, never.

May 28, 2018 04:28 PM
Rainmaker
1,525,305
Sybil Campbell
Fernandina Beach, FL
Referral Agent Amelia Island Florida

It is not for everybody, a loan officer would be the best to adivse about this.

May 28, 2018 02:39 PM
Rainmaker
5,586,209
Ron and Alexandra Seigel
Napa Consultants - Carpinteria, CA
Luxury Real Estate Branding, Marketing & Strategy

Ask a lender for the pros and cons of this. A

May 28, 2018 01:55 PM
Rainmaker
2,641,652
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

When income is tight

May 28, 2018 01:27 PM
Rainer
15,342
Erik Lilyquist
Allied First Bank, SB - Scottsdale, AZ
Mortgage Specialist, including the Reverse

As a lender, I have heard both sides of this discussion.  Some will "never" do an ARM,  and only a fixed rate, others love ARM's (typically the borrower who doesn't stay in one place for very long).

I have my opinion, but that is just me, I would say that its definitely a personal choice.   I know I will not be in my house for the duration, so I chose an ARM, because the rate (which in turn led to a lower payment) was just too good to pass up.  Now heres to hoping, with rates going up, that I don't have a change of heart... 

May 29, 2018 02:33 PM
Rainmaker
703,926
Sharon & Bruce Walter
Keller Williams Realty Lafayette, IN - Lafayette, IN
West Lafayette homes for sale

Lots of good answers and different points of view.

Jun 03, 2018 07:30 PM
Rainmaker
527,095
Dave Halpern
Keller Williams Realty Louisville East (502) 664-7827 - Louisville, KY
Louisville Short Sale Expert

It's in the Blue Man manual

Jun 03, 2018 11:39 AM
Rainmaker
4,938,372
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

I do not advice about loan programs, that is between the buyer and their lender.

Jun 01, 2018 02:46 PM
Rainmaker
104,511
Scott Lawson
America's Home loans - Santa Rosa, Petaluma Mortgage Broker - Santa Rosa, CA
Mortgage Broker FHA, VA, refinance or purchase

Two times:

 

  • When interest rates are crazy high by historical standards (like the 30 is in the 7's or 8's). 
  • When someone plans to hold the property for only a few years. They're pretty popular with investors that take their time to renovate (I've seen some that purchase the property, move in, fix 'er up and then sell after a two years).

 

 

May 31, 2018 03:15 PM
Rainer
87,820
Jeff Perlis Prime Properties
Prime Properties - Lake Arrowhead, CA
Experience Your Own Transformation!

Many reasons, one of them: if you are going to live at the property for many years and want your monthly payment to be the same. 

May 30, 2018 12:04 AM
Rainmaker
3,331,180
Scott Godzyk
Godzyk Real Estate Services - Manchester, NH
One of the Manchester NH's area Leading Agents

It is only better if you plan on being there less than 5 years. if not, get a fixed rate. 

May 29, 2018 06:34 AM
Rainmaker
4,799,491
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Good to discuss with your lender and accountant.

May 29, 2018 06:10 AM
Rainmaker
3,069,984
Tony and Suzanne Marriott, Associate Brokers
Serving the Greater Phoenix and Scottsdale Metropolitan Area - Scottsdale, AZ
Haven Express @ Keller Williams Arizona Realty

Michael Jacobs nailed this one!

May 29, 2018 05:44 AM
Rainmaker
4,042,729
Richard Weeks
Dallas, TX
REALTOR®, Broker

Yes if you are absolutely, positively, 100% sure, without a shadow of a doubt that you are going to move in 3-5 years .

May 29, 2018 05:30 AM
Rainmaker
4,209,376
Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

Your length of ownership will be limited and you can take advantage of a lower rate.

May 29, 2018 04:56 AM
Rainmaker
821,792
Olga Simoncelli
Veritas Prime, LLC dba Veritas Prime Real Estate - New Fairfield, CT
CONSULTANT, Real Estate Services & Risk Management

When the rates are much lower and you plan to sell VERY soon. Otherwise, over a longer period you would be exposed to unpredictable, potentially much higher interest costs as the rate adjusts up.

May 29, 2018 04:18 AM
Ambassador
4,312,759
Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

It is a personal choice for the buyers.

For a condo/townhouse buyers, if they plan to live in the property for less than the term of the ARM, they should opt for ARM - my two cents.

May 28, 2018 09:39 PM