Bruce Levitt, Real Estate Agent.
973-710-2293 Cell phone
273 Grove Street
Jersey City, NJ 07302
I'll be short, sweet and to the point...I agree with what others here have said..................plans change..nothing in life is definite...I thought I'd be in my first house 5-7 years, and wound up there for 22 years.
Take a 30 yr fixed...rates are at historical lows...lock in a great rate, and your future will be secure as far as your mortgage payments go.
Forget the ARM - go with the fixed.
Prudential NJ Properties
It is very hard to answer without knowing your situation, price of the home or personality.
Are you for sure moving out after 7 years?
Does it depend on something that might not materialize-like a new job, getting married, having children, moving out of town after school, etc.?
Even if you do move out, would you consider keeping it as an investment property (after 7 years you will only have paid off approximately $12,000 on a $100,000 loan. After closing costs and paying a Realtor, it leaves you with very little for a down payment on a new house. Although home prices should rise significantly over 7 years, you still have to consider the possibility of slow growth given current market and economy)?
Are there other reasons you may cosider keeping it after 7 years?
Clients call me all the time with scenarios similar to yours. The answer depends on how definite you are that the loan will terminate within 7 years. Just as an example, If you are here for medical school, but you live California and are planning on moving back after you're done, then yes you should go with the ARM. If you're just assuming that in approximately 7 years you'll feel like moving on, then I wouldn't necessarily recommend it. You have to figure out as best as possible where you stand before you can make that decision.
If you are looking at moving in 6-7 years I would expect you *might* be able to break even. I would not see any appreciation.
We have 2.7 million foreclosures already in the pipeline. We have up to 7 million to come from 2010-2013. Those will compete for the buyers you need. The federal reserve is going to stop buying mortgage backed paper soon. When they do interest rates will go up. That will drop prices. Consider the real market. Consider why you want to buy instead of rent. Right now is not the time to buy to get ahead financially from purchasing and selling a house.