Advice on my 5/1 ARM Reset

[RolyPoly]

Hi, guys. I’ve been lurking on this site for the past 2 years. I’ve learned a great deal about the housing market from reading your posts. Now I’d like to get your opinion about my situation.

My parents purchased their house back in the late 1970’s for $60K. They sold it to me for $200K in January 2004. I put 20% down and took 5/1 ARM for the $160K balance. My monthly payments are $842.00 but I pay $1K each month. The current rate is 4.75%, going up to 6.75% in February 2009. My current balance is $139K.

I’m considering 4 options:
1. Do nothing and accept the rate increase to 6.75%. My thinking is that the $200.00 monthly increase will be less than the refi charges.
2. Wait for the interest rates to drop (hopefully!) this summer then refi the $139K balance to a 15-year fixed loan.
3. Wait for the interest rates to drop this summer then refi for 30 years and take more money out of the house.
4. Pay off the full balance on the house. I can do this but it will eat up EVERY penny of my savings.

What do you suggest and why? I’m also open to other suggestions, too.

Thank you in advance for all your help and suggestions.

[HLS]

RolyPoly,
You and millions of others just crack me up.
Mortgage rates are near HISTORICAL lows; within the last 30 days they WERE at the lowest rates EVER, and you want rates to drop (hopefully) this summer ?

What do you want ? a 2% mortgage ? I guess it’s possible.

Since the FED cut rates 1.25% a few weeks ago, long term mortgage rates have gone up.

I’m in the mortgage biz, take it for what it’s worth.

Your option #1 would be dumb.
It could go up again in Feb ’10 and again after that.. why risk it when you could get another “no cost” 5 YR ARM for around 5.25% today, and buy yourself an additional 4 years of a fixed rate, and pay it off over the next 5 years if you wish.
(A 5 YR ARM with costs are in the mid 4’s today)

#2 I think that a 15 YR mortgage is a huge mistake for most people. It obligates you to a higher payment and restricts many lifestyles.

If you want to pay it off, why would you want #3 taking money out ?

#4) Way too conservative and not advised for most people who are still in their earning years.

The best answers depend on your overall financial & income picture and goals.

Find someone that can explain your options for your personal situation. It will depend on what you actually qualify for, which requires more info than you have provided above. Good luck.

[HLS]

RolyPoly,
You and millions of others just crack me up.
Mortgage rates are near HISTORICAL lows; within the last 30 days they WERE at the lowest rates EVER, and you want rates to drop (hopefully) this summer ?

What do you want ? a 2% mortgage ? I guess it’s possible.

Since the FED cut rates 1.25% a few weeks ago, long term mortgage rates have gone up.

I’m in the mortgage biz, take it for what it’s worth.

Your option #1 would be dumb.
It could go up again in Feb ’10 and again after that.. why risk it when you could get another “no cost” 5 YR ARM for around 5.25% today, and buy yourself an additional 4 years of a fixed rate, and pay it off over the next 5 years if you wish.
(A 5 YR ARM with costs are in the mid 4’s today)

#2 I think that a 15 YR mortgage is a huge mistake for most people. It obligates you to a higher payment and restricts many lifestyles.

If you want to pay it off, why would you want #3 taking money out ?

#4) Way too conservative and not advised for most people who are still in their earning years.

The best answers depend on your overall financial & income picture and goals.

Find someone that can explain your options for your personal situation. It will depend on what you actually qualify for, which requires more info than you have provided above. Good luck.

[HLS]

RolyPoly,
You and millions of others just crack me up.
Mortgage rates are near HISTORICAL lows; within the last 30 days they WERE at the lowest rates EVER, and you want rates to drop (hopefully) this summer ?

What do you want ? a 2% mortgage ? I guess it’s possible.

Since the FED cut rates 1.25% a few weeks ago, long term mortgage rates have gone up.

I’m in the mortgage biz, take it for what it’s worth.

Your option #1 would be dumb.
It could go up again in Feb ’10 and again after that.. why risk it when you could get another “no cost” 5 YR ARM for around 5.25% today, and buy yourself an additional 4 years of a fixed rate, and pay it off over the next 5 years if you wish.
(A 5 YR ARM with costs are in the mid 4’s today)

#2 I think that a 15 YR mortgage is a huge mistake for most people. It obligates you to a higher payment and restricts many lifestyles.

If you want to pay it off, why would you want #3 taking money out ?

#4) Way too conservative and not advised for most people who are still in their earning years.

The best answers depend on your overall financial & income picture and goals.

Find someone that can explain your options for your personal situation. It will depend on what you actually qualify for, which requires more info than you have provided above. Good luck.

[HLS]

RolyPoly,
You and millions of others just crack me up.
Mortgage rates are near HISTORICAL lows; within the last 30 days they WERE at the lowest rates EVER, and you want rates to drop (hopefully) this summer ?

What do you want ? a 2% mortgage ? I guess it’s possible.

Since the FED cut rates 1.25% a few weeks ago, long term mortgage rates have gone up.

I’m in the mortgage biz, take it for what it’s worth.

Your option #1 would be dumb.
It could go up again in Feb ’10 and again after that.. why risk it when you could get another “no cost” 5 YR ARM for around 5.25% today, and buy yourself an additional 4 years of a fixed rate, and pay it off over the next 5 years if you wish.
(A 5 YR ARM with costs are in the mid 4’s today)

#2 I think that a 15 YR mortgage is a huge mistake for most people. It obligates you to a higher payment and restricts many lifestyles.

If you want to pay it off, why would you want #3 taking money out ?

#4) Way too conservative and not advised for most people who are still in their earning years.

The best answers depend on your overall financial & income picture and goals.

Find someone that can explain your options for your personal situation. It will depend on what you actually qualify for, which requires more info than you have provided above. Good luck.

[HLS]

RolyPoly,
You and millions of others just crack me up.
Mortgage rates are near HISTORICAL lows; within the last 30 days they WERE at the lowest rates EVER, and you want rates to drop (hopefully) this summer ?

What do you want ? a 2% mortgage ? I guess it’s possible.

Since the FED cut rates 1.25% a few weeks ago, long term mortgage rates have gone up.

I’m in the mortgage biz, take it for what it’s worth.

Your option #1 would be dumb.
It could go up again in Feb ’10 and again after that.. why risk it when you could get another “no cost” 5 YR ARM for around 5.25% today, and buy yourself an additional 4 years of a fixed rate, and pay it off over the next 5 years if you wish.
(A 5 YR ARM with costs are in the mid 4’s today)

#2 I think that a 15 YR mortgage is a huge mistake for most people. It obligates you to a higher payment and restricts many lifestyles.

If you want to pay it off, why would you want #3 taking money out ?

#4) Way too conservative and not advised for most people who are still in their earning years.

The best answers depend on your overall financial & income picture and goals.

Find someone that can explain your options for your personal situation. It will depend on what you actually qualify for, which requires more info than you have provided above. Good luck.

[Arty]

I bet your house worth way more than the 200k you stated. Personally, I will try to refinance now because the 10 year rate haven’t move much even with Fed lowing rate. It is low enough now and get a fix 15 is not bad. I could be wrong of course.

[Arty]

I bet your house worth way more than the 200k you stated. Personally, I will try to refinance now because the 10 year rate haven’t move much even with Fed lowing rate. It is low enough now and get a fix 15 is not bad. I could be wrong of course.

[Arty]

I bet your house worth way more than the 200k you stated. Personally, I will try to refinance now because the 10 year rate haven’t move much even with Fed lowing rate. It is low enough now and get a fix 15 is not bad. I could be wrong of course.

[Arty]

I bet your house worth way more than the 200k you stated. Personally, I will try to refinance now because the 10 year rate haven’t move much even with Fed lowing rate. It is low enough now and get a fix 15 is not bad. I could be wrong of course.

[Arty]

I bet your house worth way more than the 200k you stated. Personally, I will try to refinance now because the 10 year rate haven’t move much even with Fed lowing rate. It is low enough now and get a fix 15 is not bad. I could be wrong of course.

[barnaby33]

Fixed rate mortgages probably aren’t going to get much lower. Especially as congress plays the stimulus game. 30 year fixed mortgages are somewhat loosely tied to the 10 year treasury bond. As congress tries to play the bailout game the bond market will raise rates to compensate for the freshly printed doleros. Hence it is more than likely, though not guaranteed, that Mortgage rates are going up.

HLS correct me if I’m wrong but I believe that refinancing from one first mortgage into another causes the borrower to lose their non-recourse status. For this person it doesn’t sound like a huge deal, I just wanted confirmation.

Josh

[barnaby33]

Fixed rate mortgages probably aren’t going to get much lower. Especially as congress plays the stimulus game. 30 year fixed mortgages are somewhat loosely tied to the 10 year treasury bond. As congress tries to play the bailout game the bond market will raise rates to compensate for the freshly printed doleros. Hence it is more than likely, though not guaranteed, that Mortgage rates are going up.

HLS correct me if I’m wrong but I believe that refinancing from one first mortgage into another causes the borrower to lose their non-recourse status. For this person it doesn’t sound like a huge deal, I just wanted confirmation.

Josh

[barnaby33]

Fixed rate mortgages probably aren’t going to get much lower. Especially as congress plays the stimulus game. 30 year fixed mortgages are somewhat loosely tied to the 10 year treasury bond. As congress tries to play the bailout game the bond market will raise rates to compensate for the freshly printed doleros. Hence it is more than likely, though not guaranteed, that Mortgage rates are going up.

HLS correct me if I’m wrong but I believe that refinancing from one first mortgage into another causes the borrower to lose their non-recourse status. For this person it doesn’t sound like a huge deal, I just wanted confirmation.

Josh

[barnaby33]

Fixed rate mortgages probably aren’t going to get much lower. Especially as congress plays the stimulus game. 30 year fixed mortgages are somewhat loosely tied to the 10 year treasury bond. As congress tries to play the bailout game the bond market will raise rates to compensate for the freshly printed doleros. Hence it is more than likely, though not guaranteed, that Mortgage rates are going up.

HLS correct me if I’m wrong but I believe that refinancing from one first mortgage into another causes the borrower to lose their non-recourse status. For this person it doesn’t sound like a huge deal, I just wanted confirmation.

Josh

[Author]

Posts