Best mortgage type for under 5 years?

Question

I'm in the market for a mortgage. If I'm 90% certain I will either refinance to get cash out (for remodeling etc.) or sell the property withing 4-6 years, what mortgage type would you suggest. PLEASE, no sales pitches!

Answer 1

for UNDER 5 years I'd go 3/1 ARM. 3 years at a fixed rate that is lower than a 5/1 ARM. Adjusts on the 4th year

Answer 2

This answer is assuming that you have good credit. In this market there is not a huge difference between the rates for a fixed mortgage compared to arm mortgage rates. If you are looking for a lower payment over the next 4 to 6 years, I would recommend looking at an interest only program.

To figure out which program is the best, take your expected closing costs and add the interest you will pay for 4 years based upon a couple of different programs. I would look at the interest rate and interest payment on a 30 year fixed, 5 year arm, 7 year arm and 5 year interest only. I would look at a no closing cost option and see how that compares. You are probably not going to want to pay points because on a short term mortgage, it will more than likely not benefit you.

Be careful of a few things. First is the option arm. While this will give you a low minimum payment option, you will be deferring interest and using up equity. This could put you in a difficult position in the future. Also, be careful of pre-payment penalties based upon your state. If your time frame changes, you want to make sure that you have options.

Hope this helps.

Answer 3

We'll assume you have good credit. First, at 90% you'll have to pay monthly mortgage insurance,determine a mortgage payment including mtg. insurance.

FYI: PMI is a mortgage insurance that protects the lender in case you default or your loan, in which nothing is being applied toward your loan!

OR, you can split the loan...80% 1st and 10% concurrent 2nd (principal & interest payment and no PMI).

Determine the difference in the payment, then decide if you prefer a lower payment even though it's paying an mortgage insurance, or a little bit higher payment but being applied towards the balance?


If I were you, I would do an 80/10....on an OPTION ARM with a payment of 1.5%...but that's for the big boys! You're not ready for that yet! heehee.

You should go with a 5 yr fx with a HELOC 2nd. I know you'll refi within at least 3 years tho! You might even consider buying it down a point since you're going to have it that long! =

Ok, if i'm blabbing, coz i'm a bit tired...but i'm trying to help. But important is....DID U UNDERSTAND THE WORDS THAT ARE COMING OUT OF MY MOUTH??? hehehee

Answer 4

Right now the fixed period ARM market is in the dumps. The pricing right now is very similar to the fixed rate mortgage products.

To answer your question i'm going to assume that you have good credit. 680 and better mid-score.

I would suggest a 30 yr fixed. Now if you decide to take the cash out for home improvements later on, you have the option of obtaining a HELOC (home equity line of credit) without have to touch your first mortgage and incur closing fees.

FYI there is NO SUCH THING as a no cost loan. If banks worked for free how could they stay in business? This is probably the sinlge most funniest thing i've ever heard. The borrower ALWAYS pays the costs associated with originating and processing his/her loan. Whether it is upfront costs as seen on a good faith estimate or by taking a much higher rate.

Answer 5

If I were you, I'd look into a "no-cost" refi. Generally this is a 30 year fixed rate loan, where you pay closing costs through a higher rate.

It's typically cheaper for the first 5 years of the loan to take the higher rate instead of paying cash or financing your closing costs.

Unless you can find a sweet 5/1 ARM, but most of them are really only .25%-.5% lower than a fixed rate.

Find a good loan officer who will walk you through the total cost of a 5/1 ARM, 30 fixed, and no-cost 30 fixed, over the 5 years you expect to be in the loan.

Answer 6

In today's market, a 5/1 arm (360 months=30yr term) would be your best bet. It's a fixed price/rate for 5 years, where payments get distributed over a 30yr period and it's lower then a straight 30yr term. This 5yr arm it's also cheaper/lower than a 2yr or 3yr arm, (Lenght of time for which interest rate it's locked, but will adjust once that 2-3yr period ends). Although a 5yr arm price it's locked for 5 years, it's pre-pay is only for the first 3yrs. Meaning, that whenever you decide to refi after those 3yrs pass you won't have to pay a penalty for refinancing before the 5yr period ends. Since you're looking at refinancing at least 3yrs after the buy, it's your best option. However, you should understand that at the end of the 5yrs you'll still need to refinince or else your payment will start adjusting to current end of term's market price , (Thus, resulting in higher monthly payments). There's the interest only payment and the Interest & Principal payment. There's a hit=higher rate if you choose to do the Interest only payment, although your payments will of course be lower. If you choose to pay the Interest & Principal payment, where your payments lowered the owned amount, your interest rate will be lower/cheaper. Good luck!

Answer 7

I would do a 30 year interest only fixed. You will not pay much of you loan off in the first 5 years and if rates go high you have a 30 year fixed loan that is interest only for 10 years. This will help reduce your risk and keep you payments low.

Matt
http://www.diversifiedlender.com
http://www.homemortgageminnesota.com/
http://www.refinance-second-mortgage.biz
http://www.minnesota-mortgage-rates.net

Answer 8

Nope. with techniques from definition, opposite mortgages are in elementary words obtainable to those sixty 2 and up. Sorry. Why ought to you opt for a opposite loan besides when you're literally not on a troublesome and quickly income? you should pay the finished element decrease back once you promote the residing house!

Answer 9

A 5/1 ARM, if it has a lower rate than a fixed rate loan. It will have a fixed rate for 5 yrs and will then go variable with possible rate changes annually.

Answer 10

3 year or 5 year ARM?
talk with an experienced Loan Officer