Fixed Rate or ARM For Rental Property Mortgages.

[Nicholas Misch]

Hello BP family. I have always used 15-30 year fixed rates, but I have been reading about ARM's as a possibly better option depending on how long you intend to have the financing or the property. Any advice on Fixed vs ARM vs Hybrid would be greatly appreciated.

[Allen Fletcher]

@Nicholas Misch

Remember that fixed rate mortgages are more steady for the long term. If you are buying a property as a long term investment there is nothing better than locking in that low rate for an extended period of time. ARMs may be good if you are planning on holding the property for a short period, like when you are flipping the property. From my experience ARMs typically adjust annually or semiannually so you get a fixed rate (often lower than 15 or 30 fixed) for that period of time. If you buy a property and sell it 5 months later you just got cheaper money. The key is to look at the fees and terms of both loans for every deal you do, sometimes one will be better than the other.

Allen Fletcher