From: al_tanner@excite.com (Al)
Newsgroups: misc.invest.financial-plan
Subject: Re: Thinking of 5/1 ARM based on 40Y
Date: 13 Aug 2003 09:00:02 GMT
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al_tanner@excite.com (Al) wrote in message news:<744a64af.0308121145.42795249@posting.google.com>...
> Hi,
> We could not find our dream home. We are buying a home that we are not
> going to keep it more than 4-5 years. We need $200k loan. So, we are
> thinking of 5/1 ARM with one point to keep the interest rate as low as
> possible. Our Mortgage broker's rate is %4.25 based on 30 years. But
> he is advising to go for the higher rate but based on 40 years which
> means lower monthly payments. BTW, we are just paying the %20 down
> payment but have some cash to buy more points to lower the rate but
> the recovery time would be too long.
> We would like to hear your suggestions. What's the catch here?
> Al
Based on 30 years, the broker's offer %4.75 for 5/1 ARM and if I buy
one point ($2000) the rate would be %4.25 which saves me about $60 a
month = $720 a year. So, the recovery time would take almost 3 years.
Actually, after three years we wanted to start looking for a good 
builder in our area. So, I think you are right, it makes no sence 
to buy any points in my case. But what about going for 5/1 ARM based 
on 40 years? Any advice on that?
Thanks!
Al