Refinance - ARM? Thoughts....

[Murlo26]

Originally Posted by Knoxville

Never have I ever been interested in an ARM. My brother had an ARM on his first mortgage and the minute they could increase the rate, they did increase the rate big time. He refinanced that very week and got locked into a fixed rate.

I concur with Halon, rates are virtually as low as we'll ever see them in our lifetime, lock it up while you can.

Talking with my mortgage guy the lowest you can get now is low 4% region.

Basically he said at year 5 I would want to refinance. Basically he said if you are planning on staying in your home for 10 years or more do fixed otherwise if you plan to move, relocate, buy bigger house etc this makes a lot more sense. The average mortgage only lasts 4.5 years is what he was saying so for many people it makes sense for the above reasons and mortgages never last the full 30 years so why pay the higher rates type of deal.

He said with the lower rate you then pay more towards principal with what you save and in the end you come out quite a bit ahead.

I am not for it or against it, but this guy is a mortgage specialist and has been for many many years and has his own financial business. Basically he knows more about finance than I would ever want to know so its hard to not listen to what he says to at least some extent.

We will see. I would typically agree with you guys, and get the low rate locked in forever but this might make sense. I am going to do some more digging on what possible downsides there are but I feel like this is a bit like the whole leasing talk I started haha But maybe a bit more practical.

But yes Halon, that is how I understood it, 3% then after 5 it can go to 5% at worst and he said at that point I would look into moving, refinance etc.

[Knoxville]

Originally Posted by Murlo26

Basically he said at year 5 I would want to refinance.

To me this is like gambling in some ways. To many variables could change within the 5 years. For example, lets say housing market goes under even further and your upside down on your house. Refinance will not be possible without an appraisal and such (unless something like FHA streamline comes out)

Also, if interest rates are almost at an all time low right now, they are probably only going in one direction (up). So when you refinance in that 5 years when they bump your ARM up, you're at the mercy of the current rates.

Lots of variables come into place with ARM versus fixed. Just my .02 cents

[Halon]

Originally Posted by Murlo26

Talking with my mortgage guy the lowest you can get now is low 4% region.

4% is still insanely low. Ask your parents what their first home loan looked like, I bet they'd say something like 20-30%.

I would not trade a fixed 5% range loan for a ARM that temporarily gets you 3%. Like someone else said, you have no idea what will happen. I planned to not own my townhouse anymore, but guess what the market crashed and I went upside down on it, so couldn't sell it and just rent it out now. It'd really suck if every year my interest could be increased on me.