Is ARM worth it for 1st property?

[David Travieso]

Good day BP family,

So I have my first investment property on the hook. With the interest rates on the rise, my lenders initial quotes changed drastically. Now it's 20% down 1.365 pts at 7.625 rate. 

This led me to seek out other options. I recieved a 25% down with 0 pts, 7% rate 5/1 ARM.

In both cases my plan is to refinance IF rates ever drop.

Now the 25% DP is a bit out of reach for me but if it worth paying it up front then I would definitely consider it. I know it will lower my mortgage which will increase cashflow but not sure how I feel about ARM loans.

Is it worth getting an ARM? or should I stick with a fixed rate?

Thanks in advance!

[Josh Young]

That’s a great question, if rates decrease and you cash out refi into a fixed rate loan in 3-4 years then 25% down is a better deal, but only if you have the reserves and the risk capacity to cover if rates increase in the next 5 years. What if rates increase, values go down, and rents stay the same? That’s unlikely, but possible, just make sure you understand the risks.