30 year ARM currently at 4.75% for another 15 months. Then it may go as high as 5.75% for 2 more years. Was at 3.75% for the first 2 years.
The margin is 2.5% plus 1 year constant maturity treasury. Rate adjusts up to 1% on every 2 year anniversary. Max of 12% or something.
I did an analysis on this loan versus the going rate for 15 and 30 year fixed loans at the time. The breakeven point for the ARM loan was 12 years. As long as I pay it off by then, I come out ahead. And there is the gamble on rates I made - 12 years was a worst case scenario. 1 year CMT rates could stay low, and I come out way ahead with an ARM. Or long term rates could stay low, and I could refi at some point in the future and come out ahead.
I also got the added bonus of dirt cheap closing costs, no appraisal required (stated value from some zillow.com-like database), and no PMI on a 90% loan. Gotta love credit unions!
I cashed out as much as I could and dumped it in the market back in mid-2004. Turns out it was a pretty good bet.
If I was going to redo my financing today, the numbers are different and I'd choose a fixed rate loan. I may refinance before next July when the rates go up on my ARM.