Well, this is a great thread, for literally all income levels thank you for everyone who posts and takes the time and effort!
Purchased a home, 1.655M, multiple options:
Lender 1: 20% down 6.375 30 year fixed; or 10% down 6.5%; or 0% down 6.625 (no PMI due to special professional loan program); Lender 1 will match Lender 2's lower rates for the 30 year 20% down with no points bought (saving about 10k in closing costs I think), unclear so far if they'll match rate on 10% down or 0% down.
Lender 2: 6.125, with a point or so bought back, closing costs 28k or so paid in cash, 20% down, but an investment discount that results in .625 additional points off with no cost; or 7/1 ARM at 5.65% (20% down, 20k closing costs in cash)
Basically trying to distinguish between a 100% financed loan with no PMI, no cash down at all, but a higher rate, a 7/1 arm at a mid 5 rate, or Lender 2 which has similar rate at 20% down to Lender 1, but gives a .625 investment discount for moving money over.
The 7/1 ARM is interesting because with the rate buy down with the investment discount I'm looking at sub 5% potentially, but you have the great uncertainty with this, and I'm not sure how I feel stress wise about 7 years. We are at the top with this kind of mortgage, this would free up cash for sure, but if I see rates creeping up to high 6's and into 7's in 1-2 years, what the heck do you do? Refinance? Shovel more cash into the loan in case something goes nuts by year 7? What is the strategy there? Makes me nervous to live that way potentially.
The 100% finance is interesting because it requires 0% cash down, which I guess we would sock away in a 3.5% savings account and use to somehwat offset the monthly payment which would be higher, but be able to have free cash for investment upside (of course no guarnatee market doesnt crash, but would drip it in over the years). But the downside is the payment would just be so absurdly high and every dollar counts. Another upside though, if it turns out to be too tough to handle, can just put that cash back into the loan in any amount to recast it and get a lower payment (same option on all loans above).
Finally, the 30 y fixed with investment discount seems like the most safe and standard option - but there 10% or 20%? Seems like 10% would potentially free up cash and be a little riskier than 20%, but maybe the less conservaitve option, and the 30 year 20% with the investment discount so getting almost 5.5% fixed for 30 years seems the most conservative but not unreasonably conservative option.
Thoughts from the PROS much appreciated, hope I didn't bore wtih too much detail!