To The Pointwith Boris Bozic
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0 Comments Rolling the Dice, Fixed vs. ARM (Adjustable Rate Mortgage)

Article written by Boris Bozic on the 14 Jun 2011 in Interest Rates,Mortgage

Roling the Dice with Fixed vs. ARMRolling the dice is perfectly acceptable when you’re in a casino in Las Vegas. I know from first-hand experience that playing “craps” in Vegas can be a rush. For those of you who may not be familiar with the rules or finer points of “craps”, and would like to give it a try next time you’re in Vegas, DO NOT ATTEMPT TO PLAY UNLESS YOU UNDERSTAND ALL RULES!  Now that you’ve rolled your eyes and are thinking thanks for enlightening me Bozic, the fact is many do play without understanding all the rules. Why? Because that’s where the action is and where all the noise is coming from. The noise draws you to the table, and when you get there you think I want some of this. You find yourself placing bets, not even understanding what your odd’s are. You might even start mimicking the bets being placed by other gamblers at the “craps” table. You look down at the table and you’ve got all your bets covered. Come on shooter, make this a magical role. Then you hear the most dreaded words at a “craps” table, seven out…seven out. For those uninitiated that means all your chips are gone! That’s when you start thinking if you only had played blackjack instead you could have played for much longer. But that’s gambling and it’s a part of the experience. That’s okay for Vegas but maybe not so much so when choosing between a fixed rate mortgage and an ARM.

The reality is that many borrowers are rolling the dice today. I’m setting aside those borrowers that can withstand the rate variances, and have the stomach to ride out an ARM for 60 months. I just wonder about borrowers who truly don’t understand the rules of the game. I wonder if some borrowers are placing mortgage bets based on what their neighbor or co-worker did with respect to their mortgages. Maybe borrowers are being influenced today by advertising. The 50/50 mortgage is getting a lot of airplay today, and that product was designed for those that wanted to play it safe or safer. Maybe it’s all about today and they’ll worry about tomorrow, whenever tomorrow comes. Maybe all of the above plays a part in the decision-making process but the biggest influence is the brokers personal bias.

All I know is that at some point in the not too distant future rates are going up. The warnings and predictions have been there for all to see for some time now. For example, Bank of Canada Governor Mark Carney recently said the following, “Low interest rates today do not necessarily mean low rates tomorrow,” warned Carney. “Risk reversals, when they happen, can be fierce; the greater the complacency, the more brutal the reckoning.” There’s no ambiguity there, and I’m thinking he might be one of those people “in the know”. The way I look at it any five year mortgage, under 4%, is free money. It’s also 60 months of peace of mind for the borrower. I can’t help but think if borrower’s get squeezed by a rate hike, and then they ask you how did this happen, irrespective of the facts all they will hear is, seven out…seven out.

Until next time



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Wayne Campbell Website Reply

Hey Boris;

I really like this article on “Rolling the Dice”! And when I got to the last paragraph “60 months piece of mind”, nobody could have put it any better than that. I’m sold, I just signed up to subscribe to your blog. Thanks!


Wayne Campbell Website Reply

Hi Boris!

Long time no see, but you are obviously doing well! And I am really looking forward to following your Blog. Thanks for it!

Wayne Campbell
Invis – Prince George

June 17 2011 10:36 am Boris Bozic Website

Hi Wayne, it’s been a long time. I trust all is well, family, business etc. Thanks for the kind words, and for subscribing.
Stay in touch.

Arnold Molder Website Reply

This is the most readable, entertaining and intelligently written commentary on the “Fixed vs ARM debate. It is also timely because the rate of 3.59% for a 5 year fixed rate mortgage tips the scales in favor of the the product and makes it irresistible in most cases.
Arnold Molder

June 17 2011 10:37 am Boris Bozic Website

Hello Arnold,
I’m flattered by your comments. That’s high praise coming from someone who is highly respected in the industry.
Thanks for the kind words and for subscribing to the blog.

Fixed Vs. Variable, A Little Advice From Boris Bozic Website Reply

[...] Boris Bozic, president/ceo of mortgage lender Merix Financial, wrote an excellent post on his blog entitled Rolling The Dice which I’d like share with you: Rolling the dice is perfectly [...]

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