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A few years ago, during the Fed rate drop to 1 pct, I refinanced my home from 7% fixed rate to 3% interest only ARM which helped me save over $600/month.  It has been the cheapest money I’ve ever had the opportunity to borrow so far.  I received notice a few days ago that my ARM will be adjusting from 3 pct to 5.25 pct.

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Am I in a panic about it?  Hardly!  I was contemplating paying off the mortgage but I’m going to let the good times roll despite the fact that I am fairly confident the Fed will likely RAISE rates at their next FOMC meeting in May.  Even at 5.25 pct, it’s still fairly cheap money since the real inflation rate is currently running at about 8 pct.

It is also highly likely that I’ll be purchasing a new home in a year or two so it doesn’t make sense to refinance to a fixed rate or pay off the mortgage when the money is much better off being invested somewhere to produce greater returns.

Financing is all about understanding the value of money and cheap money is always a gold mine!