Fixed vs variable rate on my cash out refi was a no brainer once I ran the numbers

I was stuck between a 15 year fixed at 5.8% and a 5/1 ARM at 4.9% for my $120k cash out last month. Ran a spreadsheet and the ARM saved me $2,400 over the first 5 years even with a worst case max adjustment. Anyone else find the ARM worth the risk when you plan to move in under 7 years?

2 comments

2 Comments

wright.taylor14d ago

my buddy actually did almost the exact same thing on his place in Phoenix. he took a 5/1 ARM on a cash out refi back in 2021 because he knew he'd be moving in 4 years for his job. worked out great because rates stayed low and he sold before the adjustment kicked in. but here's the thing, his neighbor did the same thing and got absolutely burned when rates shot up and they couldn't sell because the market tanked. so your plan sounds solid if you're really sure about the 7 year timeline, but the risk is real if life throws you a curveball. just make sure you can actually handle that worst case payment if things don't go as planned.

hugo_jones14d ago

Honestly that's just how it goes with ARMs, they're a bet on your own timeline and the market at the same time. I've seen so many people get burned because they thought they had it all planned out but then a kid came or a job transfer fell through or they just couldn't sell when they wanted to. Ngl the whole thing reminds me of how people treat car leases, everyone thinks they'll be done with the car in three years but life happens and suddenly you're stuck paying penalties. Tbh you're right that anyone doing this needs to run the numbers on the worst case payment and actually be ready for it, not just assume everything will go smooth.