Mortgage 30-Year Fixed vs. 5-Year Adjustable Rate Mortgage

Many people ask me my opinion on the pros and cons of getting a 5 year Adjustable Rate Mortgage (ADJUSTABLE RATE MORTGAGE) versus a 30 year Fixed mortgage.

What follows is a thorough analysis, a “White Paper,” backed up with a lot of numbers on amortization schedules, to document my conclusions.

What I’ve essentially analyzed is this: Does it make any sense to continually choose 5-year. Adjustable rate mortgages, with lower interest rates, versus a 30-year. Fixed loan?

Do the ADJUSTABLE RATE MORTGAGES make sense under any circumstance?

You might think intuitively that the 30 year-Fixed may be the better choice, since it eliminates so much risk, but over time, quantifying the difference might astound you.

In fact, until I did this analysis, I was a proponent of the 5 year. Adjustable rate mortgage, but no longer, and you’ll soon see why.

Before I start throwing out a bunch of numbers, let’s get clear on some background assumptions and definitions.