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Hi All,
First time home buyer. I'm a fellow starting new job in July. I'll start by saying I'm a fairly frugal person and would rather rent pretty cheap, but my wife is fed up of renting and I cant convince her otherwise. We are moving back home, know the area very well, and she does have a very good stable job with her company so it makes me feel a little bit better about it. Anyways....
I'd like to purchase a home around 500K. We have been looking at different mortgage rates.
For physician loans with 5-10% down, no PMI, and no early payment penalty, I'm getting 3.65% for 15 year fixed and a 15/1 ARM with 3.65% (term is 30 years). Obviously the ARM has a lower monthly payment, but if I were to pay extra every single month (equivalent to what the 15 year fixed would be), would I come out the same? So lets say its 4K a month over 15 years for the fixed and 2K a month during the 15 year introductory period on the ARM. If I made my payments 4K a month on the ARM for the first 15 years, is that essentially the same as having a 15 year fixed rate mortgage? Would the ARM be paid off in 15 years? My thinking is that the ARM would give us some flexibility in case we had some other expenses we wanted to put the money towards. I guess it comes down to how the armoritization schedule works out for a fixed vs an ARM right? (I realize that there is likely significant interest rate risk with the ARM given the low rates right now...the cap is 5% additional over the 30year term)
Any advice is much appreciated. THANKS!
First time home buyer. I'm a fellow starting new job in July. I'll start by saying I'm a fairly frugal person and would rather rent pretty cheap, but my wife is fed up of renting and I cant convince her otherwise. We are moving back home, know the area very well, and she does have a very good stable job with her company so it makes me feel a little bit better about it. Anyways....
I'd like to purchase a home around 500K. We have been looking at different mortgage rates.
For physician loans with 5-10% down, no PMI, and no early payment penalty, I'm getting 3.65% for 15 year fixed and a 15/1 ARM with 3.65% (term is 30 years). Obviously the ARM has a lower monthly payment, but if I were to pay extra every single month (equivalent to what the 15 year fixed would be), would I come out the same? So lets say its 4K a month over 15 years for the fixed and 2K a month during the 15 year introductory period on the ARM. If I made my payments 4K a month on the ARM for the first 15 years, is that essentially the same as having a 15 year fixed rate mortgage? Would the ARM be paid off in 15 years? My thinking is that the ARM would give us some flexibility in case we had some other expenses we wanted to put the money towards. I guess it comes down to how the armoritization schedule works out for a fixed vs an ARM right? (I realize that there is likely significant interest rate risk with the ARM given the low rates right now...the cap is 5% additional over the 30year term)
Any advice is much appreciated. THANKS!
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