Refi adjustable rate mortgage and 2nd mortgage - need advise (loan, fixed rate)

[pinkjacket]

I have an interest only adjustable rate mortgage that will adjust in April 2010 plus I have a second mortgage. I'm debating whether to refinance the whole bundle into a fixed rate conventional mortgage or put my condo on the market.

I'm not behind in my mortgage and actually pay more than the required amount on my 2nd mortgage so I'm not in emergency situation. My real problem lies in the fact that I don't want to get in a bad situation when the rate adjusts next year and am trying to head off any problems. However, I don't know if I really want to commit to a new mortgage on this place. I am also considering relocating in a year or so.

With the market the way it is I won't really make any money on the a sale and it will proably take a long time to sell and that's why I'm considering putting it on the market a year before it adjusts.

Any advice on if it's better to sit and wait to see how things play out or jump the gun and try to sell?

[SuSuSushi]

Put it on the market, see if you get bites. What's it going to hurt to test the waters?

[dad2jules]

It is highly unlikely that you can recoup your closing costs in a year, but if a no closing cost loan is of benefit to you then look at that. It will depend on what rate you have now and what rate you can get, doesn't hurt to crunch some numbers to see if it works. Your appraised value will also influence your rate and whether or not you currently qualify. You may find out it doesn't make sense and can move forward knowing this. Once your home goes on the market it will not be eligible for refinance without taking it off the market.

[pinkjacket]

My rate is 5.5% and when it adjusts it'll be index + 2.25%. Index is really low right now so if I were adjusting today it would be great, but who knows what will happen come April next year. It's kind of a tough situation right now. Granted I could put it on the market and see what happens but then I've got to come up with a plan for where I'll move if I get lucky and it sells.

[acegolfer]

Originally Posted by pinkjacket

My rate is 5.5% and when it adjusts it'll be index + 2.25%. Index is really low right now so if I were adjusting today it would be great, but who knows what will happen come April next year. It's kind of a tough situation right now. Granted I could put it on the market and see what happens but then I've got to come up with a plan for where I'll move if I get lucky and it sells.

Even if it adjusts today, it will adjust again in the next adjustment period, assuming one year from today. That's the risk the borrowers face when dealing with ARM.

My concern is that you have interest only ARM. Next year when it adjust, it will start amortizing. Even if the rate stays at 5.5%, your mortgage payment will increase by principal payment. Use a calculator to find out what your new payment would be under several rate scenarios.

Can you afford the new payment? If not, then you need to either sell it or refinance it. I agree with others that if you don't live there for another 3 years, refinancing is not a good idea.

Yes, it's a very tough situation for you. You just have to make the right decision given circumstances.

[pinkjacket]

Originally Posted by acegolfer

Even if it adjusts today, it will adjust again in the next adjustment period, assuming one year from today. That's the risk the borrowers face when dealing with ARM.

My concern is that you have interest only ARM. Next year when it adjust, it will start amortizing. Even if the rate stays at 5.5%, your mortgage payment will increase by principal payment. Use a calculator to find out what your new payment would be under several rate scenarios.

Can you afford the new payment? If not, then you need to either sell it or refinance it. I agree with others that if you don't live there for another 3 years, refinancing is not a good idea.

Yes, it's a very tough situation for you. You just have to make the right decision given circumstances.

I've worked out what my payments would be if it were to adjust today and the payment is fine. Even if it adjusted to 5.5% plus the added principal amount it's still affordable for me and does not strain my budget.

As you pointed out I'd have to stay in it another 3 years for refinancing to make sense and, truthfully, I really don't want to commit to another 3 years.

Hmmm...sounds like I might have already made my decision.