I am planning on buy a house in the US. I expect to use the own the home as my primary residence for 5 years and then use it as a rental property. I think that means I will have to refinance after 5 years and that means I will lose the long term protection of locking in a fixed rate mortgage at today's relatively low interest rates. How do I calculate the relative costs of fixed and adjustable rate mortgages over a relatively short ownership period? For example, how quickly and by how much, do interest rates need to rise before the fixed rate is more expensive over a 5 year period.

2 Answers 2


To mhoran's point, it's usually 1 or 2 years you are promising to live there. 5? no problem. Of course, he should read the terms of the mortgage.

The math depends on the terms of the variable loan. I'd set up a spreadsheet, with the ability to change the rate -

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Note, I'm not making any prediction, you'd enter the current rate, and rates reflecting best case/worst case for each year's rate. By comparing it to the same formatted fixed rate, you can determine maximum savings or the break even point if rates rise. No one can answer this for you without the terms of the loans you are considering.


Why do you think you will need to refinance in 5 years? The non-investor mortgages do include language that either requires you to occupy the home for a specific period of time or asks you to certify that you intend to occupy the property. Five years later they are unlikely to come after you. Five year is a long time, plans change.

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