shortly before going off an interest only ARM? I realize that I would not be gaining any equity, but I need a couple more years to get finances in order before going to a 30 year fixed.
2007-12-24 15:40:18 · 6 answers · asked by Anonymous in Business & Finance ➔ Renting & Real Estate
Right now, I'm in a 7 year ARM, with 5 years and 8 months left. I don't know whether to refinance now, or wait it out. I think I'm at 6.5% interest only. I was under the impression it would go up like $500 a month once the ARM is over.
I have flawless credit, as does my wife.
2007-12-25 01:28:14 · update #1
You need to look at the cost of the loan and the benefit in interest. I doubt it is worth leaving your current loan Instead start paying down your principal as though you had a 30 year loan. Get used to the payment, while you have the option to pay interest only.
2007-12-25 16:23:09 · answer #1 · answered by saejin 4 · 0⤊ 0⤋
Possible? Maybe. Desirable? No chance!
You'd only save about $200 per month on an interest only loan compared to a 5.75% fixed 30 year loan for $200k.. And since its an ARM, that benefit could evaporate as soon as the rate resets. For example, if it was pegged at LIBOR + 2% and the LIBOR at the reset period in a year was 5.5% your interest only payments would actually be about $100 per month HIGHER than a fully amortized loan.
Since it's not possible to predict future interest rates, and since this is an open election year during a market meltdown where ANYTHING can happen, going with any ARM that doesn't have a LONG lock period just isn't smart money management, IMHO.
If your finances are so tight that you can't swing an additional $200 on a $200k mortgage you need to rethink your financial situation. Cut expenditures elsewhere or sell the house.
With the current market situation in most of the country, an interest only ARM is probably the worst possible product you could consider with the possible exception of an Option ARM or negative equity loan.
2007-12-25 08:16:14 · answer #2 · answered by Bostonian In MO 7 · 0⤊ 2⤋
Yes it is possible but it better be worth the 3-5 thousand dollars worth of costs. Right now 30 year fixed rates are the bext they have been in 30 plus years. Though you might want to try a 5 year I/O type of loan. You can always pay on the principle when things get better.
2007-12-25 08:35:37 · answer #3 · answered by Bob D 6 · 1⤊ 0⤋
It is possible, but why would you want to do it? From what I understand, the interest rate for ARM loan products now is actually a bit higher than on a 30 year fixed rate. I'd do some research with a mortgage banker and see what your options are.
2007-12-24 23:55:41 · answer #4 · answered by trblmkr30 4 · 1⤊ 1⤋
Predatory lending laws require lenders to only give loans that have a 'benefit to the borrower".
Placing you in a situation where you are re-starting the payments in the same loan situation, generally does not have a benefit, and if it ONLY costs you money and you cannot recover in 3 years avg, the bank will deny the loan.
2007-12-25 05:54:16 · answer #5 · answered by Expert8675309 7 · 0⤊ 1⤋
good luck
in this credit crunch plus a high possibility you lost equity in valuation of the house
2007-12-25 07:29:24 · answer #6 · answered by goz1111 7 · 0⤊ 0⤋