I'm a little confused. Is this question for you or them? If you, then why are you taking this loan out for them?
5/1 ARM doesn't make me too excited considering the Fed is planning on raising rates incrementally over the next few years. Beware with calculations. How positive are you that they will pay it off in 5 years? A lot of people in 2002-2003 thought that things would be different in 5 years with their ARM. You know what happened 5 years later.
im not taking the loan... they will. The 5 year ARM sure the FED may raise the rates but as I said the rates are locked the 1st 5 years, which currently they are paying 1700 dollars in loans already.
A refi in a 5 ARM would decrease the interest rate almost in half, payments would be low, and the remaining would be applied towards principle. They would still keep paying the 1700 dollars monthly. How confided am I? Well I cant make decisions for them but I wont be the owner of the loan so if they stop paying they will be the ones at fault or getting a negative effect.
Its to their benefit to keep the payments. My question of the 5 year ARM is just because, keeping the payments the same, the full loan would be paid out in 5.5 years or so. The ARM would keep the rate locked for those 5 years. Any risk, if any, would be only exposed to 6 months and at the most the rate would jump 2% so we are talking 4.5% range for duration of 6 months.
Even though they - parents in law, wife and sisten in law - are not financially the most savvy, they are responsible and do know their responsibilities.
All this ideia was just cooked up by myself in order to save them interest since they are paying hight rates unnecessarily