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I guess one big question is how long you plan to live in the new house? Most people move on average within 7 years.
If you're going to move in under 7 years, you're able and willing to pay the balance off within 7, and the rate difference between the 7/1 and a fixed 30 year. In fact if the 5/1 rate was a lot better than the 7/1, you might consider that and pay down a considerable amount of the balance at 5 years (since you wont be able to pay it all until 7) if the rate adjustment is unfavorable...otherwise let it ride.
Arms are always a bit dangerous due to the length of the loan. However (and brewer would be the expert here), the bond markets persistent inversion seems to be indicating that it doesnt think long rates will be rising.
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Many an optimist has become rich by buying out a pessimist
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