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Old 10-25-2013, 12:50 AM
 
Location: San Diego CA
1,030 posts, read 1,999,813 times
Reputation: 608

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Background:

Back in 2004, we got a 7 year I/O ARM at 4.5% The rate is tied to the 1 year Libor Index.

We paid $400K in 2004. We put down $100K at that time. Almost 10 years ago.

It adjusted in 2011 from $1100.00 to $1500.00 which is still affordable for us.

Currently, the rate is at 3% until June of 2014. The monthly PI is now at $1472.00.

The max cap is 9.25%

We now owe $270K and have 20 years left on the loan.

B of A is promising they can "lower our monthly payment." We get letters every month from them, and they hold the loan that we have. I think they want to make $$ off of us.

I am more comfortable keeping this ARM and paying off extra to principal at around $900.00 per month.

We both have jobs, and a lot of disposable income to do so. Our income is around 90K a year and no kids and no other debts. We also have pensions and IRA's.

Any thoughts? We plan to stay here until we retire and we are now in our mid 40's. Another 20 years.

The equity is about $20K now due to the Big Crash. We have NO other loans on this property.

I track the 1 year Libor each month, and it seems to be at an all time low...which means it may go up, correct?

I am thinking of a 10 year pay off at between 900-1100 extra P a month...to shorten the loan/interest amount as well as to hedge against jump in 1 year Libor interest increase.

Thanks for any advice! I am a lefty and somewhat math challenged.

Last edited by Mugsy; 10-25-2013 at 01:16 AM..
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Old 10-25-2013, 01:17 AM
 
16,535 posts, read 17,618,250 times
Reputation: 23696
How many loans do you have on the property? Refi'ing usually costs money one way or another. I would wait and shop for refi a few months before the ARM matures. If I read right you're paying 900 extra per month? I think you're doing great. You got 8 months to sit on it. You're looking at what 1.3-1.5 % difference if you refi now? Are they offering a 15 or 30 ? Rates aren't gonna jump that much. There is little sign of rates going up and the fed is still buying MBS.
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Old 10-25-2013, 04:45 AM
 
Location: Southern California
4,350 posts, read 4,948,172 times
Reputation: 2129
You said that that you only have $20k equity , 270k loan and a $290k value. B of A is saying they can lower your payment are they going to "Modify your loan"? The only way I can see them lowering your payment is by adding more years to your loan since you have a low rate. What is the rate they area offering you? If they are offering you a modification, ask if it will be put on your credit report.

Based on your 5% equity which you state , I don't think you have a lot of refi options. You are currently as 3%, you might want to take advantage to pocket the cash, or pay down extra to put yourself in a position to do a competitive market refinance in the near future. Has your value gone up lately, maybe you have more equity than you think and it is more than 5%. If you are paying an extra 10k per year, you should have 20% equity to have other loan options in a couple of years.
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Old 10-25-2013, 07:19 AM
 
Location: MID ATLANTIC
7,607 posts, read 17,664,631 times
Reputation: 8107
I suspect they just want the IO loan off their books. You would be one less lawsuit if you defaulted when the rate climbs. That appears to be the trend in defaulting mortgages - homeowners suing banks (and winning) for providing loans they can't repay.
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Old 10-25-2013, 07:41 AM
 
Location: under the beautiful Carolina blue
15,776 posts, read 24,048,975 times
Reputation: 11746
When we had an ARM, when the rate adjusted every year, our new payment was based on what we CURRENTLY owed, not the amount of the ORIGINAL loan. That was a big benefit to us...especially once we hit the 10 year mark and the mortgage amortization became more principal than interest. If your loan is the same, I'd just stick with it. Our bank tried desperately to get us to refi once it was about to adjust, and we were literally signing the paperwork when I got the letter in the mail telling us the new rate, new payment and that is was based on the current amount owed. We tore up the refi paperwork and never looked back. Even if the rate had suddenly jumped up, we would have owed so much less than the original loan it wouldn't have mattered, and we had a cap on how much it could rise each year ...even if rates went up 5% in a year it could only go up 2%. At that point you have a whole year to do a refi if necessary.

The thing that killed me was how much they wanted to charge us to refi, when they were basically doing it for free every year with the ARM.
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Old 10-25-2013, 08:04 AM
 
Location: NC
675 posts, read 620,271 times
Reputation: 857
I get a letter every week from B of A wanting me to refinance. I've only had the house 4 years. I think they may be sending those letters to everyone who has a mortgage with them!
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Old 10-25-2013, 09:10 AM
 
Location: Mount Laurel
4,146 posts, read 8,411,640 times
Reputation: 3410
What rate are they offering you for a

15yrs fixed
20 yrs fixed

How much out of pocket for closing.

I would say that there is no harm in shopping to see what they offer.
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Old 10-25-2013, 10:42 AM
 
191 posts, read 370,904 times
Reputation: 184
Quote:
Originally Posted by snapdragon12 View Post
I get a letter every week from B of A wanting me to refinance. I've only had the house 4 years. I think they may be sending those letters to everyone who has a mortgage with them!
They send them to everyone. One of our houses is BoA, and we get them constantly.
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Old 10-25-2013, 10:50 AM
 
Location: NC
675 posts, read 620,271 times
Reputation: 857
Quote:
Originally Posted by charlie_paige View Post
They send them to everyone. One of our houses is BoA, and we get them constantly.
And I constantly rip them up and throw them in the trash. I don't even open them anymore.
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Old 10-25-2013, 11:45 AM
 
Location: Plano, TX
75 posts, read 218,533 times
Reputation: 24
You are fine for the next yr..... the Fed will continue to buy mortgage bands, keeping rates artificially low.

After that expect rates to rise.
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