Was using the wrong rate assumption for my cash-out refi math until my loan officer casually mentioned ARMs reset after 5 years...

I spent six months crunching numbers with a fixed 7% rate when the 5/1 ARM I was actually looking at had a 5.5% teaser plus a 2% cap, so my whole breakeven analysis was off by like $8,000 has anyone else accidentally baked in the wrong rate type for their scenario?

2 comments

2 Comments

joseph9326d ago

My buddy Tom ran into almost this exact same thing last year. He had a spreadsheet with 30 year fixed assumptions and then found out his ARM had a different reset schedule, threw his whole cash flow plan off by about $150 a month. He said it felt like doing all the homework for the wrong class.

hugo_jones5d ago

Is an $8,000 error over six months really that big of a deal in the grand scheme of a mortgage? You probably would have adjusted your spending or payment strategy once the ARM reset happened anyway. Seems like a good lesson but not something that would wreck your whole plan.