VA hybrid mortgage question

The big question is how long do you plan on staying in your home. ARM mortgages are a good option for people who plan on staying in their home for the next 3 to 6 years. If you plan on staying longer than 3 to 4 years, then it might not be the best option for you... It's safe to say that 3 years from now rates will be higher.. so even though you get to enjoy the lower payment for the next 3 years, it will go up... Also, this is all contingent upon you finding a lender that will do the VA hybrid loans. Although VA has the product, not many lenders offer it... WilliamAcres.com

You didn't say how long you plan to own this home. That is really the major factor. If you do not plan to be in this home for more than five-seven years, then an adjustable loan would probably be benificial. If you plan to be in the home long term, and since we really do not know where rates will be in 3 years, when your rates starts adjusting, you could end up paying substantially more interest than on a fixed rate loan, escpecially if your interest rate moves to the cap, and stays there, One way to look at a fixed rate loan is that you are foregoing the current "sweet" rate as insurance for knowing that your rate will never go above what it is today.

The VA Hybrid ARM's are exceptional loan programs on account of the annual loan caps of 1%. The 3/1 has a 2.25% margin, but you can also get a VA 5/1 Hybrid ARM with a 1.75% margin at the exact same rate, and with the same annual 1% loan caps. The decision to refinance into an ARM is largely going to depend on your overall goals. Are you lowering your payment so that you can invest the monthly savings into somethin else? Are you planning to sell your home in the near future? If the answer to both questions is "No" then you may want to look at another VA Fixed, as you could drop your rate by 1% on that and be guaranteed a lifetime of lower rates than what the VA Hybrid ARM will produce, as after the 1st adjustment your rate will be higher than the currently available VA 30-yr Fixed rates.

What he isn't inclucing in the Loan details is that as you pay your mortgae payment you only pay interest on what is owed instead of the original loan amount. So my understanding of it is even after 3 yrs of paying 3% and your rate goes up to 4% in the 4th yr, then even 5% on the 5th year your loan amount will roughly stay the same. Now say the rates stay around 4 - 5% for the next 8-10yrs then jumps up to 8% (super highly unlinkley) your payment may still be around the same because you have paid down your principle and you are only paying interest on the principle owed. Also what drives this insterest rate is the same way your interest rate is on your savings account which is around or lower that 1%. so 2% margins + (interest rate of savings account) = your interest rate. When is the last time your interest rate on your savings was at 3%?? 1990's?? If they were so generous as to raise your savings interest rate back to 3% they your mortgage rate would be at 5%. By the time this happens your pinciple is paid down and your payment would actually be less because your only paying interest of what is owed. For your interest rates to go up that much is highly unlikely unless the economy will be doing extremely well which isnt going to happen for quite sometime. Now say by some miracle the economy is booming to the point it gets to the worst case senario and you have an 8% interest rate it would be capped and you would have paid enough on principle it would affect you much and of course if could even go down lower that 3% and you would get that rate too. Fed's are saying rates will remain low with no plans of raising anytime soon, Banks of course are saying hurry before the rates go back up because they want to sell you a loan. I am no expert on this but I have sat through the pitch of this loan, I am contemplating going with this loan myself, Im just put off by the expense of the closing costs and you are paying down the points. My closing estimate was $14,000 which is crazy for closing for a refi in my opinion but 5k of that is buying down points. But the best thing about this loan is like a credit card payment you are only paying interest on what is owed. That is the biggest benefit of this.