5/1 ARM 1 chance to change to fixed in the first 5 years? (loan, fixed rate)

[dragonnfly]

Hello, Has any one heard of a adjustable rate mortgage for the first 5 years, but in that first five years you have one chance to move it over to a fixed rate at 2% above prime? The terms might not be quite the same but thats what our were. The thing is our 5 years is up on June 1st, 2009. I just went looking for the paperwork and I cant find a thing in there. I distinctly remember her telling us this and I even called them a few months later and discussed it with them about where the best place was to keep track of the prime rate. The problem Im probally going to have is that initially we were with ABN-AMRO then went to Lasalle and now BOA. Anyone heard of this loan type? and would the option transfer with my loan? My intrest rate would actually go down .50% if I can make this happen.

[ricardocobos]

It sounds to me like a loan that might actually exist but I think you may have the index of 2 over "prime" wrong it is probably the "Fannie Mae offer rate" plus 2. Even if it is 2+ prime that takes you to 5.25% and if you intend to move within then next 3 years that migght be an good and cheap option. But if you are planning to stay for a while you may benefit from a refinance of that mortgage. Another thing - call or write you lender and request the copy of the Adjustable Rate Mortgage Rider to your Note, heck ask for the Note too while you're at it. It may take a few weeks to find it but it is worth it to know what the terms are so you can make an informed decision.

[dragonnfly]

I can remember so clearly her telling us about this option and her say it was 2% above prime, not fannie may rate. I called a few days later to clarify and to get a good resource to track the prime rate and they told me the wall street journal web site was the best and that it was the prime rate to look at. I am just in disbelieve that I cant find any reference to this in this stack of paperwork that i have here. I have been looking forward to this especially since it fell to 3.25, but maybe refinancing will be the way to go if thats not the case. Thank you for your response.

[SmartMoney]

ANB-AMRO had many of what I refer to as whacked-out loan terms. Call the 800 number at BofA....put it on speaker while you are doing something else. After you confirm the terms, definitely request the ARM Rider and loan program disclosure. Be sure to inquire about any fees associated when exercising your option to fix the rate. June 1 isn't a whole lot of time, but the terms (if over prime) aren't bad either. In fact, today, the 5.25% is comparable to a 0 point quote, and in fact, better than a refi w/ lender paying all closing costs (that would run more like 5.75%+++ for the lender to pay the attorney/recording and so on).

It sounds like the terms to fix the rate are fair. You may also inquire to see if you can pay any points to get the rate down. Then you can decide if it pays to do that (or not - depends on how long you plan to remain and how many points).

[dragonnfly]

OK I posted this in January and since then I have ben lingering in the shadows waiting to see about the forecast of the prime rate. Anyways I finally called about this option, the first person I talked to was insisting I needed to talk to some one in the refinancing dept., I eventually gave up and called back again to got someone else. They do have a option right in the menu when you call it says "If your loan has a fixed rate conversion option press 5 to hear the current rate" So I press 5 again and the lady says that yes they have that program but it doesnt start until Mar 1. My question is my loan was to be able to be converted anytime in the first 5 years. Is this another federal program thing Im getting in to? Do I want to do this?

[ricardocobos]

there is no federal program that I know of. I would request a copy of your Note or Promissory note and all the addendum's and riders to it to make sure you understand what you agreed to and what the mortgage will enforce.