Mortgage Questions

[Nomad99 401]

We are in the process of refi right now. We currently have a 5 year ARM that we are going into year 3 in Dec. 2006. our rate is 4.25 In dec 2009 it will jump to 6.25 dec 2010 it jumps to 8.25 dec 2011 it tops out at 10.25 & can't go higher. we currently owe $224000

 

I'm a novice at this so here are the #'s for the new mortgage:

6.375 fixed 30 year.

We are looking to take out $10K for some home improvements so our new mort would be $235000

 

I have been looking at some charts estimating what interest would be paid over the next 4 years with both the new mort & the old one........

 

If we go with the refi we will pay 25-30K more int over 4 years than we would if we keep the ARM.

We could take a home equity loan for 15K over 5 years @ 6% & keep the current mortgage....this would be paid off the same time our current mortgage was due to jump to 8.25 & we would be down to 200K with only 24 years left.

 

 

I'm looking for input on which plan makes more sense. I know we cannot predict what interest rates will be at when our ARM is due to go to 8.25 but the additional interest over 5 years if we move to 6.375 from 4.25(3.66yrs) & (6.25 1yr) is significant.

 

Hep Me! Hep Me!!!

[hoytdwow 202]

It was my understanding that there would be no math.

[KSB2424 3,082]

How long do you plan on living at this house?

[fricker66 91]

I have no idea what you are talking about.

[joneo 529]

No offense, but no one should have taken an ARM when the rates were so low for the last few years. If you had a lower credit score and that's all you could get, that's the suxor. ARMs are the devil's work.

[brinett9 0]

I would count on interest rates continuing to go up, which would mean that the sooner you refi with a fixed rate the better.

 

It's easy to get upset over having to pay more over the next few years, but I thikn it's wise to play for the long term if you think you may stay in this house a while.

[Patriotsfatboy1 1,432]

No offense, but no one should have taken an ARM when the rates were so low for the last few years. If you had a lower credit score and that's all you could get, that's the suxor. ARMs are the devil's work.

My first mortgage was an ARM. I figured that the rates were going to come down before my ARM started changing (5 years, 2% max per year, max 3 changes over life of loan). I was right at the time.

 

However, I can't see why people were going with ARM's, interest-only loans, or any of the other scams that were perpetuated over the last 4-5 years when the rates were so freaking low.

[Nomad99 401]

No offense, but no one should have taken an ARM when the rates were so low for the last few years. If you had a lower credit score and that's all you could get, that's the suxor. ARMs are the devil's work.

 

 

Agreed! But we had to go that rout to get the mortgage. Who knows what we may want to do in 5 years...maybe look for a smaller place. I'm just not sure if we should jump to a fixed 6.375 now or hold out for 3+ years @ 4.25 & 1 year after @ 6.25.......4 more years at less than 6.375 makes a big diff in interest paid over that time........

[TimmySmith 2,782]

Why are you re-fiing now when you have 2 years left on your 4.25? And then another 2 at 6.25? I wouldn't a thing until 2010 unless rates drop dramatically. You might even move between now and then. Take out a home equity for the 10K and pay it off as quickly as you can. Leave the mortgage alone. That's what I would do.

 

3 of my best friends OWN mortgage companies, and NONE of them have a fixed rate on any of their properties. They adivised me against them and it makes sense. In 5 years time there is a great chance of moving or re-fiing, why not go with the lower rate.

[brinett9 0]

Agreed! But we had to go that rout to get the mortgage. Who knows what we may want to do in 5 years...maybe look for a smaller place. I'm just not sure if we should jump to a fixed 6.375 now or hold out for 3+ years @ 4.25 & 1 year after @ 6.25.......4 more years at less than 6.375 makes a big diff in interest paid over that time........

Run to the fixed rate, my son.

 

Run like the wind.

[swirvenirvin 25]

Why are you re-fiing now when you have 2 years left on your 4.25? And then another 2 at 6.25? I wouldn't a thing until 2010 unless rates drop dramatically. You might even move between now and then. Take out a home equity for the 10K and pay it off as quickly as you can. Leave the mortgage alone. That's what I would do.

 

3 of my best friends OWN mortgage companies, and NONE of them have a fixed rate on any of their properties. They adivised me against them and it makes sense. In 5 years time there is a great chance of moving or re-fiing, why not go with the lower rate.

 

 

exactly no point in refi now... especially if you dont have a clue how loing you are going ot be living there you still have what 3 years left on this rate and arm.. I woudl wait till the last year of your arm then make the decisions.. who knows by then.

 

If you really think you are going to be there for 10+ years then sure go ahead and refi now

[Cdub100 3,366]

At least you're saving all this money for a nice big payment on the house by using an ARM... right?

[Cruzer 1,992]

It was my understanding that there would be no math.

[Nomad99 401]

At least you're saving all this money for a nice big payment on the house by using an ARM... right?

 

 

We got the ARM because our rating would not allow a fixed at that rate at the time....we can get the fixed now.

We owe $224000 now.

We want 10-15K for improvements...replacement windows, painting, repairs etc....

Last appraised at $310000(2 years ago) & have since added a 2 level mahogany deck.

If we take out a home equity loan of 15K it will be paid off in 5 years at about the same time the ARM is due to jump to 8.25. we will owe around 200K on the house by then & it should appraise around 330K.

 

We are just not sure if we should keep the ARM or jump to the fixed @ 6.375 when we have 40 or so more months at 4.25 & then 12 months at 6.25.....

[Cdub100 3,366]

We got the ARM because our rating would not allow a fixed at that rate at the time....we can get the fixed now.

We owe $224000 now.

We want 10-15K for improvements...replacement windows, painting, repairs etc....

Last appraised at $310000(2 years ago) & have since added a 2 level mahogany deck.

If we take out a home equity loan of 15K it will be paid off in 5 years at about the same time the ARM is due to jump to 8.25. we will owe around 200K on the house by then & it should appraise around 330K.

 

We are just not sure if we should keep the ARM or jump to the fixed @ 6.375 when we have 40 or so more months at 4.25 & then 12 months at 6.25.....

 

I would talk to a morgage expert. Like someone already asked how long do you plan on staying in this house. If you plan on staying for a long time it might be better for you to get the fixed now and lock up that rate. If you planing on selling soon stay with the arm.

 

I'm not sure what the market is in your area, but around here SE Michigan a house appraised at 310K 2 years ago would be appraised for less now.

 

and I'm guessing you didn't save any money while on your ARM

[KSB2424 3,082]

How long do you plan on living at this house?

 

Thats the last time I try and help somebody!

[swamp dog 0]

I would count on interest rates continuing to go up, which would mean that the sooner you refi with a fixed rate the better.

 

It's easy to get upset over having to pay more over the next few years, but I thikn it's wise to play for the long term if you think you may stay in this house a while.

 

excellent advice. people living in a home long-term that have arm loans right now are going to get absolutely hosed.

 

if you live in your house another 20 years, you will most likely NEVER AGAIN see fixed rates as low as they are right now.

 

pay a little more now by getting into a fixed (if you plan on being there awhile) and save lots of $$$ in the long run.

 

and if you can't afford the payment on a 6.3 fixed loan today you're in too much house. sell it and buy something cheaper.

 

I would talk to a morgage expert. Like someone already asked how long do you plan on staying in this house. If you plan on staying for a long time it might be better for you to get the fixed now and lock up that rate. If you planing on selling soon stay with the arm.

 

I'm not sure what the market is in your area, but around here SE Michigan a house appraised at 310K 2 years ago would be appraised for less now.

 

and I'm guessing you didn't save any money while on your ARM

 

just make sure it's not someone in the mortgage business. that's like asking a car dealer what kind of car you should buy.

[Jim Mora 26]

How long do you plan on living at this house?

 

That is the key question right there, you need to answer that first. In any case, your best bet most likely is to go straight for the fixed rate. But you should be able to find something better than that rate.... Also, make sure there are no penalties for "refinancing early" on your ARM...they love to throw that clause in there. Good luck.

[Ravens 03 0]

No offense, but no one should have taken an ARM when the rates were so low for the last few years. If you had a lower credit score and that's all you could get, that's the suxor. ARMs are the devil's work.

 

Disagree.

 

I got a 7 year ARM 4 years ago - now at 4.75% ad will stay that way for 3 more years.

I have no problem with what I did and would do it again in a minute.

 

The answer to this question lies in how long he plans on staying in the house.