Financing my first duplex

[Michael Franklin]

Greetings, all.

I just went under contract on my first duplex and I could use some input in regards to the financing options I'm considering for the deal. This will be a non owner occupied investment property.

When calling to get a firm insurance quote from State Farm, they presented me with financing terms I didn't know were available for a multifamily investment property. I had already met with a local bank and discussed a 5/1 20 yr ARM @ 4.625% with 15% down. Assuming that interest rates will probably only go up from here, I wasn't thrilled with the ARM but the other banks I had talked to in the area offered similar terms and most wanted at least 20% down so I thought this was my best option. However, State Farm offered me up to 30 yr fixed @ 4.625%. The the caveat, though, is I have to put 25% down.

So basically, I'm torn between 5/1 20yr ARM @ 4.625% with 15% down and 30yr fixed @ 4.625% with 25% down. I realize if they were both fixed rates I could use a discounted cash flow approach to determine a winner. But considering the ARM as a variable, I could use some guidance.

I ran both cases through my spreadsheet, shown below. Granted, it doesn't account for the ARM adjustments or TVOM of the down payment difference between the two options. And my mortgage estimate calculation is yearly amortization divided into 12 payments, for those checking the numbers. I will probably get around to correcting it at some point but it's close enough for the sake of this analysis.

5/1 20yr ARM @ 4.625%, 15% down

30yr fixed @ 4.625%, 25% down

Thank you in advance for taking the time to read through and share your thoughts.

-Mike