Had to pick between a fixed rate ARM hybrid and a straight 30-year fixed for my rental property

I was looking at financing a duplex I just bought in Portland last month. The hybrid was offering 4.5% for the first 7 years then it adjusts. But the 30-year fixed was at 5.8% which felt painful. I went with the fixed because I couldn't sleep thinking about rates jumping after 7 years. Now I'm paying $250 more each month than the hybrid would have been. But at least I know exactly what my payment is for the next 30 years. Has anyone else dealt with this choice and regretted going either way?

2 comments

2 Comments

johnson.jason11d ago

Went with the fixed on my rental too and honestly it's been a relief even though it stings every month. That hybrid rate looks great on paper but 7 years goes by faster than you think. I've seen too many buddies get caught when their adjustable rate jumped 2-3 points after the fixed period ended. Rents might go up but so do taxes and insurance so you can't always count on covering that gap. Plus if you ever sell before that 7 years you're fine but if you hold onto it the gamble gets real. The $250 difference isn't nothing but I'd rather have predictable numbers for my cash flow than praying rates stay low.

ben_ross5111d ago

Man I used to be all about the hybrid rates thought I was being smart saving that money upfront but you're absolutely right. Seeing friends get wrecked when their payments jumped a couple hundred bucks overnight changed my whole view on that gamble. Better to lock in the fixed and sleep easy than stress about what happens when that rate resets.