Time to refinance again? (home loan, fixed rate, interest, approve)
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I think it's time but thought I'd get some input from others. A decent credit union I currently offering a 5/5 conforming ARM at 2.75%. It can only raise a max 2% every five years up to a max 5% over current rate (rate could max out at 7.75% if that's where the rates are after it resets three times).
It's a no closing cost loan. I'm looking a two potential transactions and not sure what the downsides would be, if any.
First loan is $340k at 3.75% 30 year fixed that started in 10/11. Would save just under $200 per month for the next five years. Loan could reset to as much as 4.75% in five years for five more years, depending on prevailing rates a the time. May have this loan for at least the next ten years, maybe less, maybe more.
Second loan is $165k at 4.00% 30 year fixed that started in 04/12. Would save $100 per month. Would most likely pay this off before five years but definitely before ten years.
I don't see the negatives on the second loan but I may be overlooking something. On the first loan I am a little concerned only because I have a guaranteed 3.75% t I may be trading for something worse down the road.
Well in 7 years after your loan adjusts a couple of time and if interest rates return to the historical levels of 7%+ then you are looking at a payment of around $1000 more than you are paying now.
Do you really want to join thousands of others wondering what the hell their mortgage is going to do at their first adjustment? You'll be trading a lower payment for what I call "the sleep at night" factor. But in any case, it will be interestesting to see if the new laws protect the poor, poor, pitiful consumer <heavily laced sarcasm> in your case. See, post Frank-Dodd, there is suppose to be a tangible net benifit to the consumer before the lender can approve the loan. It would be interesting to see how the benefit is explained in your loan. (This is not something the consumer would even see or hear about, unless the loan was declined for this reason).
It's a 5/5 ARM. Only resets once every five years. And the smaller mortgage will be long gone before 10 years are up (the second reset) so that loan will only to up, at max, to 4.75%. Still mulling this over...
I still don't know why you wouldn't just get a fixed loan and not worry about it.
3% too high for you?
For 90%-95% of people, fixed rate is the way to go.
For financially savvy (and financially secure people), 5/1 ARMs are great.
My brother/sister in law have done 5/1 Arms with almost all their home loans. They make 800K plus a year and own a 1.7 million dollar home with only a $600K mortgage.
So it's a game to them. First they did a 4% 5/1 ARM (no cost), than switched to a a 3.5% 5/1 ARM (no cost), than switched to a 3% 5/1 Arm (no cost again).
I think they were looking into a 2.5% 5/1 Arm a week or few weeks ago. Can't remember.
The key with serial refinancing people who now how to play the interest game is they have money to cover if rates jump.
Each time they chose the no cost/no closing cost rate cause they didn't want anything out of pocket.
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