Mortgage Loans - Adjustable Rates - Anyone have experiences to share?
 

Hey folks, I have always been the 30yr fixed kinda guy and have recently started thinking about adj rate mortgages to save a couple bucks on the month while the wife is off work with the twins..... Any thoughts? Horror stories? etc, etc?


Thanks!

As long as your balance is over $80,000 I would say a fixed rate is the wrong thing to have. The main reason a mortgage broker would advise a fixed rate is because they can get paid more off of them. I know this because I am one.

Hmm... I would have to disagree with you here tingly :D

I would say that it is entirely dependant on your situation.

How much longer are you planning on living in your home? Are you expecting a substantial increase in income? If so, when?

Also, how tight are you on monthly payments right now - worse case scenario, would you be able to afford an increase in payments and still keep your standard of living the same?

After these questions, I should be able to suggest something for ya :D

I recently refinanced and went from a 30 yr fixed to an ARM with a ten year lock in. I'm locked at the low ARM rate for the next ten years (it was a full percentage point below the fixed rate at the time). It seemed to fit my situation as I think over the next ten years we will see interest rates rival current levels again and should I wish I can refinance again and get a fixed rate. But I'm not too sure if I'll even be in this house that long.

The difference between the ARM and fixed rate is going to the principal.

well, as I mentioned above, I recently had twins and the wife is only working part time and the cost of day care for two girls is taking a nice bite out of our income. I thought about selling our home but could not even come close to what we have now. The balance of the loan is roughly 180k, the house would apraise for right around 300k. We have a 5.78% fixed rate for 30yrs now, basically I am looking for something to buy some time until we can get rid of some things..... What is the difference between those 3/1, 5/1 and 7/1 ARM and Jumbos. There are also interest only loans as well.

Well, that is an excellent 30 year fixed rate, I'd leave it alone if I were in your shoes.

Basically, the difference in the ARMS is the first number represents how many years the loan is fixed for, the second is how often it can change. For instance, the 3/1 ARM means that the rate is locked for 3 years and can change every year thereafter. The lower the "locked in" period, the lower the interest rate.

Jumbo loans are called "Jumbo" because they exceed a certain state instituted amount. Here in Wisconsin, I believe that amount is 387,000 - but it varies from state to state.

You mentioned "getting rid of some things" - did you by chance mean to pay off some other debts? If that is indeed what you are thinking about doing, you may want to consider a second mortgage. That way, you'll still have your rate on the first, but consolidating with a second will often times lower your payments substantially, in addition, the interest is generally tax deductible.

If you have any more questions, just ask :D

To ARM or not to ARM.. that is the question.. lol.

The question is answered by what you need out of your mortgage.. it sounds as if you need a break from your payments..

An ARM could certainly accomplish this for ya... you could pay as little as 1.95% for the next 5yrs if ya like... there is a possiblility that by doing this you could owe a bit more on your mortgage than you do now.. but.. again.. what is it you need.. people pay ungodly interest rates on credit cards all the time.. is it wise.. hell no.. but that person wants something.. or needs something... .. so there is that answer.. make the mortgage work for you needs.

;]

Thanks for all the information guys! Much appericated! I guess it is time to rate shop.. :lol:

There can be penalties for selling if you are using an ARM and sell before the fixed date ends. The way it looks to me, is you use an ARM to save you some money, and then refinance when your fixed period is up.

When I was buying a house, the plan I was going for was 80/20 on a 3/1 ARM, saving almost $5,000 from a fixed 30yr loan in the 3 year period, since it was a 100% loan I didn't have to make a downpayment, but I still didn't have to pay mortgage insurance.

Just depends on your situation!

I have a 3/1 ARM.

My interest is only at 4.25 right now.

People say, "It depends on how long you'll live there" or "Depends on your situation", but interest is interest. Even if you had a 5.3% on a 30 year loan, you're still paying $150 more than I am a month. Personally, I'd much rather pay 4.25% than whatever the going rate is at now :)

Besides, with the extra $$ you save in interest, you can just dump it right back towards the principal

It's the way to go, IMO, but don't take my word for it, I'm by no means a real estate expert.

Mine caps at 6.25, I believe, if it were to ever go that high (not likely anytime soon).

hey stompy.. whomever told you your loan caps at 6.25 was lying to you... I would be willing to bet any amount on it.

it more likely caps 6.25% above your initial rate.

there is acompany called world mortgage that can start you out with 1.95 % in a differed interest program, it basically works as a 5 year arm, starting out at 1.95 and working up 7.5% of your payment every year (1000.00 year one, 1075.00 the next year and so on untill you catch up to the interest rate which is tied to prime. ) The good thing about this is that you are already in good shape in terms of equity, and since you set it up with bi-weekly payments you are not going to go"upside down" that much. Its a good program that I had signed a couple of people on, its worth a look. It would help you out cause your payments are very small comparied to a 30, which by the way you do have a good 30 year rate, but the question that makes pr breaks whether you do anything is how long you plan on staying in your house.

Well, I went with a pay option 1 year ARM. You have an initial min payment based apon a 1.25% rate that does not change for the year, you have a interest only payment that can fluctuate depending on what LIBOR does. They put their 2% ontop of the LIBROR rate. There is also a 30 yr "fixed" rate that can be paid as well. SO, I don't it was too bad of a deal. Closing cost were low, (below 1k), there is no pen for early termination of the loan. So, with this loan, I could do the min payment (you will get hit with neg amorization) or the interest only payment or the 30 yr payment.