[Woodman]

I bought my first house on a 5 - 2 - 6 adjustable rate mortgage. It was 7.125% APR with no teaser rate and could only adjust every 5 years with a MAX 2% swing and 6% lifetime Cap. I could have taken a 1 year ARM at about 6.875% APR with a 6% CAP, but I did my research before buying.

To make a long story short, I was planning on getting out in less than 10 years. I stayed for 7, got adjusted up to 9.125% after 5 and paid an average APR of about 7.765%. If I took the Fixed 30 offered at the time of closing, I would have paid about 8.375APR for 7 years, if I had take the 1 year ARM I would have been bumped to at least 9% within 3 years and God knows what APR. So please tell me what I did wrong with my ARM, and why I shouldn’t have been offered it under any circumstances?

[sionnsar]

So please tell me what I did wrong with my ARM, and why I shouldn’t have been offered it under any circumstances?

Don't know why you think I'm against offering them, but in the circumstances of my purchases they'd have been extremely risky. Work it out carefully, as you did, and it's fine. But it can be a trap for the unwary.

[sionnsar]

BTW, I didn’t run your numbers. I just accepted your claim that your analysis said you got a better deal. If so, good for you!

[Nuc1]

Somewhat similar but my cap is 10% 1.25%/2yrs all tied to the prime. So if the prime isn’t doing much and i’m protected by the rate of rise clause and the 10% cap, which is a bit higher than modern tradition but not much, where is the risk? I can cover the delta’s and the cap but I don’t believe I will ever see it. It was and is a good deal. And I am one of those conservative boomers that works hard and pays the bills.

[ErnBatavia]

I bought my first house on a 5 - 2 - 6 adjustable rate mortgage. It was 7.125% APR with no teaser rate and could only adjust every 5 years with a MAX 2% swing and 6% lifetime Cap. I could have taken a 1 year ARM at about 6.875% APR with a 6% CAP, but I did my research before buying. To make a long story short, I was planning on getting out in less than 10 years. I stayed for 7, got adjusted up to 9.125% after 5 and paid an average APR of about 7.765%. If I took the Fixed 30 offered at the time of closing, I would have paid about 8.375APR for 7 years, if I had take the 1 year ARM I would have been bumped to at least 9% within 3 years and God knows what APR. So please tell me what I did wrong with my ARM, and why I shouldn’t have been offered it under any circumstances?

Betcha can't say that three times fast!

:)~