My sister has a mortage for $79,000.00 loan for which she was paying a fixed 7.11% for two years. She was just notified that the new adjustable rate will be 8.63% adjust. (approx. 100.00/month more!). My question is: Should she refinance so that she doesn't pay 100./mo. more? And if it is a good idea to refinance, please explain what the pros and cons of refinancing are, and what she should be looking for. I believe the value of the property is supposed to be $110,000.00 now.
(please tell me what details you might need to better assess the situation so that you can provide resolution options)
Thanks, in advance - She will need to make a decision within the next three or four days - PLEASE HELP!!!!
Also, this I enter this in the correct Yahoo Answers category? (credit)
2007-01-16 15:51:23 · 6 answers · asked by poecilia.r.lvr 2 in Business & Finance ➔ Credit
Thanks for the answers so far. Can you also be more specific as to "what her goal should be?" It it reasonable to request/look for another 7.11 fixed? Also, any negative side to refinancing?
2007-01-16 16:58:44 · update #1
LTV=79K/110
cred.score=low (560)
income=2652/mo (31,824/yr)
(thx!)
2007-01-16 17:07:07 · update #2
Of course she should refinance now!!! She just got notified that her Adjustable Rate Mortgage (ARM) is going up...along with everybody else in the country. Foreclosures across the nation are at an all time high due to "ARM's". The thing with an "ARM" is that she'll be lucky to ever see it go down. They're a great thing if you intend to pay off your loan in a short period of time, horrible if you're going to take it long term.
She should refinance now at a fixed, locked rate that won't go up on her every year.
Contacting a reputable mortgage broker in her area would be the best thing she could do.
7.11% seems to me to be reasonable with her LTV...but that;s dependant on the lender.....Just trust me that her rate is not likely going to go lower for quite a while (Maybe never)...only higher
2007-01-16 16:28:42 · answer #1 · answered by Kim K 2 · 0⤊ 0⤋
There are a few things to consider:
1. If she went back into an adjustable mortgage program, she can get a rate around what she originally had - 7%. However, the exact same thing will happen after the initial fixed period is over. This will put her into a cycle of refinancing every two years, which is not good.
The thing with subprime adjustable mortgages is that the intial rate is discounted. And when the initial fixed period is over, the rate almost always raises WHETHER OR NOT market interest rates have changed.
2. She can get a loan that is fixed for a much longer period, such as a 30 year fixed. However, the rate will be higher, probably around 8%. As long as she can afford this payment, she will at least be guaranteed a fixed rate and she will have plenty of time to fix her credit.
I recommend she speaks to a GOOD mortgage broker - the subprime mortgage market is fairly confusing and rates can vary widely between lenders.
If she does intend to get another adjustable mortgage, I invite you and her to take a look at the ARM article I posted on my website - it has everything you need to know about evaluating an adjustable mortgage (it is not a sales or application site)
http://www.mortgagemystery.com/
You can contact me if you have more questions or need assistance.
Regards,
Rob Byrne
2007-01-18 10:36:35 · answer #2 · answered by robert_byrne 2 · 0⤊ 0⤋
With a 30 year mortgage a bank has to guess what rates are going to be for the entire term and what yield they're losing on lending that amount of money to you for a longer period of time. With a 5 year ARM they only have to commit for 5 years and then reset the rate to whatever the current market is. Obviously this is easier to do for shorter periods and much more accurate. The rates start a bit lower since they'll be corrected in 5 years when market conditions vary. Like the above people have all stated the ARMs that are out there now are adjusting up by quite a bit. If you are considering that type of loan make sure you can afford the payment at the maximum rate the mortgage allows for in the time you'll be in the house. If not, then it's a very risky loan to sign up for.
2016-05-23 23:02:48 · answer #3 · answered by Anonymous · 0⤊ 0⤋
There are no cons.. refinance now, her rate & payment will only keep going up. What she got is called a "2yr ARM" (adjustible rate mortgage), it was a loan just to get her in the house, at a reasonable rate & payment. But now the Fixed part is over and the Adjustable part is starting, and won't stop. Need To Know: 1) her LTV (loan to value), how much dose she owe (ex 100K) compaired to, how much it's worth (ex 110K). 2) what's her credit score (it should be better now after 2yrs, if she made on time payments) 3) Income; stedy job? (hasn't quit, been layoff, or different type of job). Now's a good time to Refi, it's the off season (home sales). Rates will go up starting in March (spring)and won't start coming down until end of Oct. (fall).
2007-01-16 16:58:22 · answer #4 · answered by Alex G 1 · 0⤊ 0⤋
Yes, she needs to refi now. She needs to shop around a little bit for a mortgage broker and see who can get her the best deal. She needs to get a fixed rate this time, not an adjustable, because if she gets another adjustable rate, this same thing could happen to her again in a couple of years.
2007-01-16 16:41:54 · answer #5 · answered by kelly h 3 · 0⤊ 0⤋
Always worth a look. Get a free quote from these guys ( the banner at the top ). It's a big name company that's helped lots of people. I'd give their link here but that's advertising for them. They helped my wife and I a few years back when we purchased our current home. It never hurts to look around for a better rate. Good luck!
http://loan.divinfo.com/
2007-01-16 23:14:36 · answer #6 · answered by Anonymous · 0⤊ 0⤋