Why You Might Be Overpaying for Your Mortgage (Stop Doing This)

Adjustable rate mortgages, also known as ARMs. People think, eh, risky, risky. I know I could pay a little less, but I don't want to risk it. I'm going to tell you why that's the better option right now and how it's going to save you money coming up next. Hey everyone, Dan Palomino from KW Big Island and the Hawaii team. And today we're going to talk about adjustable rate mortgages versus fixed and how Dan is going to save you money. All right. So listen, all of this talk is about, oh, interest rates, interest rates, interest rates, it's depressing the market. That's why people aren't buying. And I don't know if that's the case because more and more transactions here on the Big Island are becoming cash. I'm thinking by the end of the year, at least 50% of all the transactions here on the island are cash. But if you have to go finance, I have a solution for you. Let's do an ARM. Let's do an adjustable rate mortgage. You're saying, oh, Dan, I don't know. I don't like adjustable rate mortgages. Come to the end of that. I'm going to pay a really high amount. Listen, right now, as I'm sitting here, if you did an adjustable rate mortgage for three years, you would save a boatload of money over a fixed 30 year fixed rate mortgage. I'm serious. You would save considerable amount of money and the risk is minimal. All right. So now that I'm 58, I'm going to put on my glasses and I'm just going to share some information with you. So listen to these numbers. Are you ready? Right now, as the date of this video, the fixed rate mortgage is now over 7%. It's at 7.1. And if you were to do that on, say, a $1.5 million home, you're buying 1.5, you're putting 300 down, you're getting a loan for 1.2 million. Do the math with me on the screen. You're going to pay principal in interest of a little over $8,000 a month. Now, if you did an adjustable rate mortgage, you're going to pay principal in interest at about $7,000 a month. You're going to have about $1,062 per month saving. Now think about that. You think $1,000 a month in savings, that's $12,000 a year. Let me give you paid over time, right? Paid total over three years, the fixed at 7.1, you're going to pay $290,000. The adjustable rate mortgage, you're going to pay $252,000. So we've got a savings of $38,000, but that's not all. Talk about interest paid. So interest paid, you're going to pay $251,000 over the three years. On the adjustable rate mortgage, you're going to pay $203,000 of interest. So we've got a $48,000 savings just on the interest category. The principal, right? How much principal you've paid down. On the fixed, you've paid down $38,000 in principal. On the adjustable, you've paid $49,000. So you've paid $10,000 more, right? And at the end of 36 months, the balance is $1.16 million, right? $1.16 million for the fixed and $1.15. So we've got a $10,000 savings there as well. All the numbers bear out that it's way better to go for the adjustable rate mortgage. But you say, oh, Dan, at the end of three years, I've got to refinance it. You're going to refinance it anyway. Anyone that's buying a fixed rate mortgage at 7.1 today is doing so with the idea that they're going to refinance in the next 12, 24, or 36 months. So if you're going to refinance anyway, why wouldn't take the cheaper rate? And trust me, I think there's little chance that at the end of three years, interest rates are worse than 7.1. But you can figure that out for yourself. And here's the other thing. I also do the math. At the end of three years, what if you didn't do anything? What if you had to keep going with it? My math on this report shows that you could go with the adjustable rate mortgage up to seven and a half years before it starts negatively impacting you. Seven and a half years before it starts negatively impacting you. Do you think you could refinance somewhere in the next seven and a half years? Absolutely. So take the arm. Now, here's the last part. If you're interested in going in this direction, you have to talk to my friend Robert Lucido, Jr. So contact me. Either send me an email at danatthehawaiiteam.com. Leave a comment on this YouTube video and say, hey, send me Robert's information. We want to talk to him about the arm. I'll do it. It's just that simple. I hope this was informative. It was incredibly enlightening for me. I went to a seminar in Oahu. I heard about this and they started doing the math and I said, I got to tell everybody about it. So if we're going to buy property and we want to get that Hawaii dream home and we've been holding off because of interest rates, then we don't have to hold off anymore because we can do it with a much lower rate with an arm. All right? Okay, everybody. That's all I've got for today until we talk again. Aloha.