10/1 ARM better than 30 yr FHA? 550k & 315k property

[Varun Parkash]

Guys, I have a 30 year - 3.75% fixed rate loan on 550k property that I am thinking of refinancing it into a 10 year ARM. Currently the loan has completed 2 years. Property is now an investment property for which the original loan was secured as a primary residence loan. I also bought a 2nd home - vacation (315k) - closing in a few months - and have locked a 30 year loan at 3.875 interest rate - by paying $1300 fee. My question is : 1. Does it make sense to convert both of these loans to 10 year arm loans to get interest rates dropped to 2.5? 2. Since the second home hasn’t closed yet - my options are open and no closing costs etc has been paid yet. Is it recommended to take 10 year arm on it? 3. What fees/penalties do I have to pay to refinance house 1? I read that arm loan conditions are that home can’t be sold for 5-8 years ? Both these above homes are investment purposes and eventually I will be buying a 3rd home in 1.5-2M range for living myself in a couple of years. Currently I loose around 4K/year on home #1 (550k) - if my interest rate drops from 3.75 to 2.5 - there’s a considerable saving of $300 something per month in p&i Please advice the pros and cons

[Andrew Johnson]

@Varun Parkash This is going to be an overly general statement but you have really low cost debt with a locked-in rate for nearly 30 years.  Put yourself out 5+ years into the future.  Do you think you'll be happy with your interest rate?  I'm going to guess the answer is "yes" and the same will be true if you were asked the same question 20 years into the future.  The single thing that keeps me (metaphorically) up at night is that my commercial debt is on a 5 year with a balloon.  I'm not worried about paying the mortgage, the balance, or even the amortization period.  But, you never know what's going to happen of what the interest rates will look like in 5 years.  Will they still be 4.5%?  Probably not.  Will they be 6%?  7%?  Who knows.  They could end up at 8% for all I know.  While the "wheels don't come off" at 8%, it certainly won't be any fun to have a lower loan balance but a monthly payment that's about the same...maybe a little lower...or maybe a little higher.  Anyway, good ol' fashioned boring 30-year fixed rate mortgages are a lovely thing...