Deciding between a fixed and a 10-1 arm mortgage

[Sara Taslitt]

Hello-

I am in the process of closing on my first property. The bank has offered me a 30 year fixed rate loan at 4.8% and a 10-1 arm loan at 4.0%. I am leaning more towards the 30 year loan because it feels less risky. I would love to hear people's thoughts and experiences. The bank seems to favor the 10-1.

Thanks,

Sara

[Bill B.]

That’s because there’s less risk to the bank with the shorter loan. take the longer loan and pay it on the 10 year schedule. The payment will only be $38/mo higher over taking the must pay in 10 year loan per $100k.  It’ll cost you less than $5k over 10 years for the option of making the lower payments when you want (about 1/2)