92126_guy …
Your 1st is fixed for 5 years, then adjustable. Ever wonder what rate it goes to after 5 years ?
The “margin” and “index” define the rate to which it will adjust. Find your loan documents. You should be really curious as to what your loan rate will reset to since it could mean the difference between losing your home or keeping it.
For example, some adjustable rate loans are tied to the 12-month LIBOR index (that’s the “index”) plus 2.5% (that’s the margin. The current value of this index is about 3.4%. Meaning that a loan based on this index and margin would reset to 3.4% + 2.5% = 5.9%. The LIBOR has varied between 1.2% and 5.8% over the past 5 years and tends to trail short-term treasury rates.
The fact that your 1st is IO for 10-years may buy you some valuable time.
Is the 2nd a fixed rate ? If not, it’s an adjustable at a fairly high margin (prime plus 3.65%). If your second is variable, I would try to concentrate on paying it down first.
Assuming the second is fixed rate, you currently pay 2400 (1st) plus 1100 (2nd) plus taxes and insurance.
If your 1st resets to 7% for example your payment would go up by $50 per month. Not a huge deal. If it resets to 8% your payment will go up by $400 per month (starting to feel some pain, but doable).
