We are currently at an ARM with 7.125. Its due to change next month to 9.125. We only plan to stay in the home for another 2-3 years and then sell. We are being offered an 8.125% for a fixed but with a huge loan amount. Our credit, not the best. Should we consider taking another ARM (like 5/1) for a lower rate knowing we will sell the home in a few years or go with the fixed?
2007-11-13 04:42:28 · 9 answers · asked by Curious123 1 in Business & Finance ➔ Renting & Real Estate
If you plan to stay in the home for 2-3 years and then sell, it would be tempting to take another ARM, but you don't say what that rate would be. If it's going to be near the fixed rate (within a couple of decimal pts.) then I'd just go with the fixed rate and not have to worry about prepayment penalties and the like. Also - you may WANT to sell your home in 2-3 years, but there's no guarantee you'll be able to do so if the market continues to stay on the path it's on. I think I'd want the security of a fixed rate just in case something happens and you're unable to sell it at that time - at least you won't have another deadline looming over your head & who knows how high the interest rates will be by then. Use the time between now and then to repair your credit so you can qualify for a better rate when you do sell so you'll have better options for your next place.
2007-11-13 04:58:31 · answer #1 · answered by Flusterated 7 · 0⤊ 0⤋
You cannot predict the future market.
There is nothing to say that you will be able to sell in 2-3 years. We may still have an abundance of homes or have a buyers market then too.
Make your plans today based on what you are capable of today. If you can get a fixed and make the payments I would go with that rather than 'hedge' my future on whether or not I will be able to sell when this next arm comes due. Plus if your credit and value in the home does not improve along the way.......there are even less guarantees for future refinance.
Many people took loans that 'felt' good because the payments were cheap, but their plan to just Refi was thwarted when values started to drop and foreclosures became more available. What made them think they had a guarantee of continued increasing value? Now they are in foreclosure because they cant refi or sell. You're smart for asking a 3rd party because some loan agents don't give you the bad news for fear you'll go elsewhere and or that if you choose a fixed they'll get less $.
Good Luck
2007-11-13 06:58:46 · answer #2 · answered by Anonymous · 0⤊ 0⤋
If you will only stay in the home for a few more years, the lower interest rate is the way to go. But if you can afford the higher payment, pay over what you owe. You will gain more equity in the home, which is just cash in your pocket when you sell.
But regardless of how you refinance, remember you are going to be paying fees to do it. You may end up worse off with the additional costs. Look at your equity, refinance just that much (do not cash out money!!!) and see how much the total you will be financing after all the costs. You could come out ahead just sucking it up and paying the increased payments.
2007-11-13 04:53:50 · answer #3 · answered by Meghan 7 · 2⤊ 0⤋
It all depends on your credit and LTV.
What is your property worth copared to what you owe?
What are your credit scores?
You might be able to get a better deal then the 8.125%
Did you shop it at all?
Can you prove your income through paystubs and tax returns?
Is there anythign you can do to help your credit scores out quickly?
Was the mortgage paid on time?
Currently most ARM programs have the same rate as fixed rates so there is not much of a benefit.
2007-11-13 04:52:45 · answer #4 · answered by Anonymous · 1⤊ 0⤋
Go with the fixed, the prices of homes are dropping so you actually might already not be in a position to refinance, let alone 2-3 years from now as market values are expected to drop in the next year or more. Would not want to have another reset when out of equity, and in a buyers market
2007-11-13 10:20:22 · answer #5 · answered by Pengy 7 · 0⤊ 0⤋
i would go with a 3/27 arm...why get a 5/2 arm if you are planning on moving..you will have to pay a pre-pay then and not worth it...but ask yourself if you are really postive you will be moving before you do this...and keep in the back of your head you then have a couple of years to really work on your credit so you can walk into your next house with a good fixed rate.
2007-11-13 04:51:11 · answer #6 · answered by becca9892003 6 · 0⤊ 0⤋
Go with the fixed. They can keep increasing the other rate if they like, and things change. The market sucks, if it keeps sucking, you won't want to or won't be able to sell your house.
2007-11-13 04:46:40 · answer #7 · answered by Mac 2 · 0⤊ 0⤋
depends...on your credit and LTV...
if your credit is low...and the LTV is high...then the rates on a 30yr fixed mortgage might be the same as a 5/1 ARM.
FHA mortgages are at 7% and lower for a 30yr fixed.
Might as well get the 30yr fixed
2007-11-13 04:47:12 · answer #8 · answered by Anonymous · 1⤊ 0⤋
get arm
2007-11-13 04:45:58 · answer #9 · answered by Ralph N 5 · 0⤊ 1⤋