Could someone give me some mortgage advice?
Question by disappearing: Could someone give me some mortgage advice?
I bought my condo four years ago with a 5/1 ARM because I thought I’d be moving by now…and I am–except, the value of my house has dropped so low it doesn’t make sense to sell it. So, I’m renting it out. That’s kind of beside the point. I have no problem with my payments at 5.125% and my bank will renew my 5/1 arm next year in June at whatever rate they’ve got. They’re offering a 5.5 right now. I can’t refinance w/ a fixed as the value of the property is too low in comparison w/how much I owe on it. Should I get the 5.5 now, or is there a chance ARMs may fall within the next year or so? Any advice would be greatly appreciated. Thanks.
P.S. I would appreciate it if I didn’t hear the old “it’s your fault we’re in this mess” stuff. This was NOT a sub prime mortgage–the bank was very thorough in asking for credit rating, bank account info, salary, etc. I have a full-time job and job security so I won’t be defaulting anytime soon.
Best answer:
Answer by Howard L
Check the adjustment formula on your existing 5/1 ARM. Most ARMs adjust based on the on the one year LIBOR rate. Your mortgage will say something like the new rate will be 2.5% above LIBOR on the adjustment date. You may be surprised to find out your interest rate will drop when the mortgage adjusts because LIBOR has dropped below 2%. I’ll guess your new interest rate will be about 4.5%. Don’t touch your mortgage and smile when they tell you what the new payment will be.
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Short Term Cash Advice
Even if the rate falls, you can’t afford NOT to get a fixed rate loan. Rate WILL increase significantly as soon as the MASSIVE debt the US government just created begins effecting the market. A fixed rate sub-prime loan is better than an adjustable rate loan. Also, at least TRY to refinance with another lender. The worst they can do is say no.