Quote:
Originally Posted by Rick Lee
I think everyone who gets an ARM plans on refinancing or selling before it adjusts.
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The ARM you are talking about is some funny loan where the rate was artificially low in the beginning and then kicked up after x years. If you do not refi before x, you are screwed. However, there is the traditional ARM which can be okay long term:
A traditional ARM actually "adjusts" to a tied interest rate, i.e. the 10 year treasury bill. In addition these loans usually limit the possible adjustments both annually and with an overall cap. I used to have an ARM like that and it would be around 5.5 percent APR currently. (If I would have not refinanced into a fixed rate long time ago, because the adjustability of my monthly mortgage payment had me a little uneasy.
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George