The first mortgage is ARM with fixed-rate for 5 years and the second mortgage is Heloc. There are no prepayment penalties to either mortgages if we refinance at any time after close. I'm told that the prime rate will NOT be going up anytime soon--that more than anything the prime rate will go down because of the slump in the economy. Should I go ahead with this type of mortgage? Thank you.
2007-05-10 15:13:18 · 7 answers · asked by need2no 1 in Business & Finance ➔ Renting & Real Estate
I understand the part about the ARM and HELOC being risky and that is why we plan to refinance after 2 or 3 months because there is no prepayment penalties on either mortgage. The house I'm interested in is a quick move-in so the price is about $90k less than the base price of the same house being built. I guess what I'm really asking is how everyone else sees and predicts the prime rate will go in the next few months? Thank you for the responses so far.
2007-05-10 15:53:35 · update #1
I agree 100% with acermill, but my question is this. Why would you refinance in 2 or 3 months when it is locked for 5 yrs? If you are willing to refinance in a few months just do a fixed now. Understand in 2 or 3 months you get all those closing cost to pay again, except maybe your appraisal will still be good. My opinion is if you are willing to take that loan now then ride it out for awhile and see what rates do. If they start shooting up then refi.
2007-05-10 16:52:19 · answer #1 · answered by Dano N 3 · 0⤊ 0⤋
Do NOT take an ARM for five years UNLESS you expect to sell the property within those five years. From what little you have revealed, I'd venture that you're going to be close to or at 100% financing value. The only way to know what the prime rate will do in the future is to get inside of Bernanke's head, and at this time, Bernanke doesn't know what the prime will do.
If the economy does not do as you expect, what will you do with a five year ARM which will raise two points automatically at the end of five years, plus a HELOC which is based on the prime? You're ASKING for trouble by going this route.
2007-05-10 15:42:56 · answer #2 · answered by acermill 7 · 0⤊ 0⤋
I would definitely go with a fixed rate now. It makes no sense to take an ARM now, pay closing costs now, and then in a couple months refinance, pay more closing costs... make sense?? You could always try to get qualified for a 40 or 50 year term.. your payment will be lower. I work for a mortgage company, we originate all over the US and we refinance ARM's daily.... These poor people with 10 - 12% interest rates.. take the fixed, don't even chance it. Good Luck!
2007-05-16 16:07:34 · answer #3 · answered by momma_duke 2 · 0⤊ 0⤋
It's a decent loan, but there are much better out there. Don't jump into a bad loan just because you want to buy the house and don't feel you have better options.
I'm a direct lender and a mortgage broker. If you would like me to check into this for you, I would be more than happy to see if I can get you a 30yr fixed loan at an exceptionally low rate. That way you can compare the two loans apples to apples to make sure that:
1. You're already receiving the best rate and loan term. OR
2. I will be able to have a much better rate and excellent fixed term.
I'd love to take a look at this for you. Feel free to email me at: andrew@internetmortgagepro.com
Thanks.
2007-05-18 08:19:48 · answer #4 · answered by Anonymous · 0⤊ 0⤋
I don't get it either.
Why on earth would you take a 5 yr. ARM now, just to refi and spend $3000-5000 or more on refinancing in 2 months?
And right now, you're lucky to save .25% on a 5 yr. ARM compared to a 30 year fixed. So why not just take that now and be done with it?
You're completely on the wrong track here. You need to find a new lender.
2007-05-10 17:17:38 · answer #5 · answered by Yanswersmonitorsarenazis 5 · 0⤊ 0⤋
Hi,
I'm a Realtor in Virginia. It sounds like you are getting a house with instant equity so you might have to "do what you have to do" to make it work. The downside to your plan is the closing costs you will pay when you refinance. It sounds like you will still be ahead of the game, considering the deal you are getting. You can find some great links on the "Consumer Info Links" page of my website at: http://www.staffordhometeam.com/Nav.aspx/Page=http://www.mortgage101.com%2fpartner-scripts%2fraterouter.asp%3fp%3d177918
Best of Luck to You
2007-05-18 15:19:13 · answer #6 · answered by Chuck 1 · 0⤊ 0⤋
I would not recommend a Arm loan or a Heloc just get a regular loan. If you want more advice let me know I can help.
2007-05-15 12:32:01 · answer #7 · answered by elizvillar 1 · 0⤊ 0⤋