10/1 ARM vs. Fixed Rate

[Thokkalee]

48 minutes ago, IamBhagatSingh said:

 

Help me understand. Let's say we have taken 100k loan with 5% interest. 

So monthly bank will charge interest of 500$. They won't charge more than that, anything more you pay goes to principal. If we are there with that bank for 1 year by  paying interest(500$) + principal (500$) we would have paid 12000$. 

Now  if we moved to different bank for refinancing, wont we owe only 100k-6k=94k? 

So how does it matter? 

You have lot of learning to do bro… it is not that simple..

https://www.bankrate.com/mortgages/amortization-calculator/

https://www.finder.com/how-is-interest-calculated-on-a-home-loan#how-is-mortgage-interest-calculated

that is correct if you are taking the loan for only one month.. also 100K ki @5%, annual interest is 5000, not 500. That is divided by 12 and you get the monthly interest on average.., all loans are front loaded with interest.. use the above calendar and check how much interest and principal you pay every month..

also your total interest depends on the loan term.. you pay more interest if you take a long term loan..

[Anta Assamey]

54 minutes ago, IamBhagatSingh said:

Usually how much will be the closing cost? 

Depends upon the state bro... Ball park idea aite look at this site..https://www.rocketmortgage.com/learn/closing-costs

[IamBhagatSingh]

3 hours ago, Anta Assamey said:

Depends upon the state bro... Ball park idea aite look at this site..https://www.rocketmortgage.com/learn/closing-costs

 

3 hours ago, Thokkalee said:

You have lot of learning to do bro… it is not that simple..

https://www.bankrate.com/mortgages/amortization-calculator/

https://www.finder.com/how-is-interest-calculated-on-a-home-loan#how-is-mortgage-interest-calculated

that is correct if you are taking the loan for only one month.. also 100K ki @5%, annual interest is 5000, not 500. That is divided by 12 and you get the monthly interest on average.., all loans are front loaded with interest.. use the above calendar and check how much interest and principal you pay every month..

also your total interest depends on the loan term.. you pay more interest if you take a long term loan..

 

3 hours ago, macha said:

No that’s not how it works look at this image and you can use any mortgage calculator to see https://ibb.co/st0smcZ for your example 100k  initial you pay $333 interest and $194  to your principal over the time gradually you will contribute more towards principal and less to interest… banks want to make money first 

Thank you. Will take a look 

[chingchang]

4 hours ago, IamBhagatSingh said:

 

Help me understand. Let's say we have taken 100k loan with 5% interest. 

So monthly bank will charge interest of 500$. They won't charge more than that, anything more you pay goes to principal. If we are there with that bank for 1 year by  paying interest(500$) + principal (500$) we would have paid 12000$. 

Now  if we moved to different bank for refinancing, wont we owe only 100k-6k=94k? 

So how does it matter? 

Thats not how it works. Mortgage interest is based on balance left and it changes every month. Google for Amortization calculator and enter your loan details there and check breakdown monthly. You can also add extra payments per month, once an year to see how much you can save 

[chingchang]

On 11/7/2022 at 1:57 PM, cameraman said:

ARM rate looks lower. With 10/1 ARM , as 10 years is a long time, If the rates fall at some point in those 10 years, we just refinance it. This allows lower payments until refinance. 

Please share your thoughts and let me know if I've missed out anything.

Go for it .. I took 7/1 ARM back in 2016 when i bought my house. Interest rates at that time are 3.7 for 30 years fixed and 7/1 arm is 3.1. I refinanced in 2020 and again in 2021 when the interest rates were down. In the current situation,i doubt the interest rates go down in next few years but 7 years is long way to go. You can always refinance anytime you want 

[cameraman]

23 hours ago, chingchang said:

Go for it .. I took 7/1 ARM back in 2016 when i bought my house. Interest rates at that time are 3.7 for 30 years fixed and 7/1 arm is 3.1. I refinanced in 2020 and again in 2021 when the interest rates were down. In the current situation,i doubt the interest rates go down in next few years but 7 years is long way to go. You can always refinance anytime you want 

thanks