4.99 to 2.25 ARM: Did I do the right thing?
So, I just closed on my home, again, yesterday and started to doubt whether I actually made the right decision. Here is some of the back story.
I was moving cross country on military orders and stayed in a hotel until closing. I was ready to close on my home until the appraisal came back way under (VA Loan sometimes do this). So I sat in my little hotel room with wife, my new born, my 10 week old puppy and a UHaul parked outside trying to figure it all out. Luckily, I had the best realtor who actually allowed us ALL (yes, even my NOT potty-trained puppy) to move in with her. She quickly found us another home which we fell in love with although it was above our price range.
The deal was made and we got into our $150,000 house (plus the VA funding fee) with only $2,500 in closing costs. However, that stuck a big ol' 4.99% interest rate on my 30 year mortgage. I was paying over $600 in interest and under $200 in principle. This seemed like NONSENSE so I looked for alternatives. My wife and I quickly found a 2.25% 3-year ARM which is backed by the VA. This loan lowered our payments significantly and almost doubled our previous principle payments while reducing our interest payment by more than half!
Here's the catch. I had to take a few steps back. Or, I should say, 10,000 steps backwards. After paying for all the closing costs (Florida has ALOT) It turned out to be about $163,000. Although I do plan to sell within the next 3 years (military orders) I want to make sure I didn't make a terrible mistake by lowering my payments now just to save a few hundred dollars but increasing my total loan. Any advice?
I also want to know what anyone things about this if I do decide to keep it and rent it. Do I refinance it again to a 30 year? Is it safe to wait and see what the rates change too after the 3 year period. Please offer any advice. Thank you.