10 yr arm vs. 30 year Mortgage

We are new to this and trying to see what would be our best options for our primary residence mortgage-

$900,000 mortgage

3.625% int - 10 yr arm - $7,000 closing costs
4.00% int - 30 yr fixes - $7,000 closing
Both our credit scores are above 780.

We are planning to keep this property for at least 10 to 15 years, if not more. Me and my spouse are in late thirty and mid forties and have a kid who will go to college in 10 years.

I am leaning towards 10 yr arm and spouse towards 30 fixed, reasoning from her is, if we refinance we end up paying more interest and longer term. I want to do the 10 yr as the interest is low and we don’t know in 10 years we may rent it or sell it for an upgrade or downgrade.

What is the norm.

Interest rates are near record lows. The odds are pretty high that when the 10/1 ARM expires rates will be higher. You can always take the 30-year and just pay extra every month. Personally, paying down a 4% mortgage doesn’t make sense unless you’re close to retirement. Locking in a 30-year at 4% now gives you a lot of flexibility in the future. It’l be easier to keep the home as a rental if you want, since you locked in the low payment now.



You’ve even more into graphs lately.

I hate words. Prefer graphics and numbers.

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Discussed with a coworker on this very topic in the past. He opted for 10 year ARM because he’d rather use the extra interest he saves and puts it towards his principal. His position is that if he is still keeping this house after 10 years he can refi to a 15-yr fixed loan at that point in time.

He is assuming that the rate at the end of 10th year won’t be much higher than now. Is a bet :slight_smile:


That’s true, and if it’s much higher he’s arguing that the fact he paid down his principal significantly during the first 10 years will make it a zero sum event.

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Might as well get 30-year and pay extra every month. That way there’s no risk in 10 years.

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Welcome to home owners great dilemma!

This is no brainer work with above statements.

Close your Eyes and Listen to your spouse. 0.25% increase is nothing compared to your refinance or rate hike later.

When you are not certain about selling in 10 years , better be safe 30 fixed mortgage !


I totally agree with Jil here. I don’t like surprises down the road and rather sleep easy knowing what my interest will be 1 yr, 2 yr, 5 yr. If it goes down significantly you can always refinance.

Always had adjustable mortgages, no regrets

I already started regretting about arms taken a few years ago. Now my arm rate is higher than the fixed rate a few years ago.

But on the other hand, if you got a low fixed a few years ago and now do a cash out refi, your Leo rate is gone anyway.

But with only 0.375% difference, no need to save that small difference

Overall, rates have been falling since the 70’s. We’re at rock bottom now, so that trend can’t continue.

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What if the difference between the current ARM and a new 30 yr fixed is 1.125? Does it still make sense to refinance and get into a fixed rate? Mortgage amount is the same as OP.

If the difference is 1.125, I may take the risk and keep the arm. It also depends how many years left for low rate for your arm.

But everyone’s risk tolerance and situation is different. Just do what you feel comfortable. There are many more considerations in life.

Hi @Neel,

I needed to talk to my mortgage broker since I may have found my private sale home, so I forwarded your quoted rates to her for comparison. She said those are good rates for primary and that you should lock in asap as rates are on the rise. Good luck!

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Thank you all for the valuable responses. Gave more clarity to make a decision. We locked for 30 yr fixed at 4.00% and fingers crossed.


First, mortgage amount you mean monthly payment same?

It depends on holding years and uncertainty in future rates

If you plan to hold beyond your arm lock years, IMO, better to refi towards fixed now as I still see 4% is too low fixed mortgage for 30 years.

Your colleague should open a spreadsheet and do a break even analysis to understand at what pp rate increase is it a zero sum event and then make a bet on whether they think rates would raise more than zero sum threshold.

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