Mortgage Refi advice

[1100011CS]

It seems I'm late to the party on this but I don't want to miss it completely.

We have a 5yr ARM through ING Direct at 6.125%. We are a little more than a year into it.

The options I see are:

ING is offering a "rate renew" where you just lock in the current rate (4.5%) for another 5 yrs for $750.

Get a 30yr fixed which rates are 5.0% and closing costs are around $2700 everywhere I've looked.

Or do I wait and see if it comes down again?

[keepngoal]

It seems I'm late to the party on this but I don't want to miss it completely.

We have a 5yr ARM through ING Direct at 6.125%. We are a little more than a year into it.

The options I see are:

ING is offering a "rate renew" where you just lock in the current rate (4.5%) for another 5 yrs for $750.

Get a 30yr fixed which rates are 5.0% and closing costs are around $2700 everywhere I've looked.

Or do I wait and see if it comes down again?

I would go this way... BUT how long until you 're-coup' your upfront closing costs? if under 2 years, I would go for the 30 year fixed.

another thought.. what it the adjustable rate tied too? that is VERY important in making this decision.

-keep

[Incyte]

If you plan on being in your home more than 5 years do the 30.

[1100011CS]

I would go this way... BUT how long until you 're-coup' your upfront closing costs? if under 2 years, I would go for the 30 year fixed.

another thought.. what it the adjustable rate tied too? that is VERY important in making this decision.

-keep

We would recoup our closing costs in a little under 2 years with the 30yr. 5 months with the "rate renew".

I think the ARM is tied to the LIBOR.

[ajk4st8]

We refinanced part of our 80/20 loan. It was a piece of cake because we have paid so well on it. They paid all costs for us.

[brianhos]

It seems I'm late to the party on this but I don't want to miss it completely.

We have a 5yr ARM through ING Direct at 6.125%. We are a little more than a year into it.

The options I see are:

ING is offering a "rate renew" where you just lock in the current rate (4.5%) for another 5 yrs for $750.

Get a 30yr fixed which rates are 5.0% and closing costs are around $2700 everywhere I've looked.

Or do I wait and see if it comes down again?

30 year fixed at 5.0%, take it now, grab it quick, why are you on CF and not calling your bank???

If things get really bad, interest rates are going to go up a lot. Take this now, it is great protection.

[keepngoal]

and isn't LIBOR a FannieMea index?

is the rate renew then really a 10 year fixed? 5 at 6.125% and other 5 at 4.5%? If not and only for 5 years at 4.5%.. I would take the 30 year.. if it is, then the 10 year known.

when was the last time 30 year rates were at 5%? To me that is the way to go.

-keep

[CY ST8T]

I believe there is something in the works where you will be able to contact your current lender and they will refinance you to a lower rate under Obama's big plans. I don't know the details, but my dad works in the industry and has said that I should hold tight and wait until my current lender contacts me regarding this program.

[1100011CS]

and isn't LIBOR a FannieMea index?

is the rate renew then really a 10 year fixed? 5 at 6.125% and other 5 at 4.5%? If not and only for 5 years at 4.5%.. I would take the 30 year.. if it is, then the 10 year known.

when was the last time 30 year rates were at 5%? To me that is the way to go.

-keep

It's only locked for 5 yrs from the date I accept it at 4.5%.

Thinking the 30 yr is the way to go.

[clones_jer]

and isn't LIBOR a FannieMea index?

is the rate renew then really a 10 year fixed? 5 at 6.125% and other 5 at 4.5%? If not and only for 5 years at 4.5%.. I would take the 30 year.. if it is, then the 10 year known.

when was the last time 30 year rates were at 5%? To me that is the way to go.

-keep

No. Its the Euro version of the prime rate the way I understand it.

stands for London something borrowers interest rate

[keepngoal]

since its British.. go with the 30yr.

[PGreen ISU '92]

If you can prove you should never have been purchased a home in the 1st place you can get the best deal. Under the details of the United States Treasury’s Making Home Affordable (MHA) Program announced by the Obama Administration yesterday if your PITIA (Principal, Interest, Taxes, Insurance, Association dues) is over 31% of your gross income than you can have your interest rate reduced down to as low as 2% fixed. If you still aren’t down to 31% you can have your term stretched out to 40 years. And yes if you’re still not down to 31% it’s optional for the lender to forgive some of the principal amount of your mortgage loan. Not only that but if you make on-time payments on your modified mortgage loan then we (the American people) are going to give you $1,000 per year for 5 years just for paying on time your new mortgage which we subsidized. For all of us who originally agreed to the terms and conditions of a mortgage loan we could afford – Tough Luck!!!

[Incyte]

since its British.. go with the 30yr.

Unless you are fairly certain you will be moving within 5 years.

[sunset]

Nobody can predict where rates are going, no matter what they tell you. You can get an idea based on implied forwards, but implied forwards are directional at best (if I remember correctly, they tend to over-estimate future rates).

Somebody else hit the nail on the head, what is your break-even point (saved interest payments versus cost to refi, not reduction in monthly payments versus cost)? If you are relatively certain that you will be in your home longer than the break-even then you refi. You should also do a sensitivity analysis to see what your savings would be if rates moved up or down a half percent, this will give you an idea of what you would hope to gain or risk by waiting for rates to change.

Now, as to which option to select. You can do an analysis that shows the extra savings over five years you would realize with the adjustable option vs the higher rate fixed and then play that off against the likelihood that rates will be higher after year five (i.e. will the extra savings make up for higher interest you will have to pay in the future). This would involve estimated what rates might be in the future and, as I inferred earlier, I'm not one to gamble that rates will be lower in five years. As such, I would say if you are going to be in your house (by choice or otherwise) more than five years you might want to play it safe with the fixed. A bird in the hand and such. But that's a choice only you can make.

One final item, when you re-fi they will probably put you in a new 30yr mortgage since their is virtually no rate difference between a 30yr and 20yr mortgages right now. While it is nice to have the option of lower payments associated with a new 30yr, should things take a wrong turn and you need to pay less each month, you may want to make extra payments over the life of the loan so that you pay it off on your original loan time frame (i.e. your last payment is 30yrs from the day you bought the house, not 30yrs from your refi). This will save you even more interest over the life of your loan.

[GoCy]

Dump the arm for the 30 year.

Much of the current housing crisis is due to ARMS coming due for homeowners, and the interest rates are jumping up high enough that the owners can no longer afford the payments. They can't refinance because they are upside down after the drop in home prices, so they are stuck with the high ARM rates. My sister almost got caught by this in SoCal, but luckily their appraisal was high enough to refinance. To me, the extra 0.5% rate is well worth being able to sleep at night knowing that your interest rate if fixed.

For what it is worth, we are refinancing with Wells Fargo for 5.375%, with them paying all closing costs. It might be well worth your effort to look around a bit and see what deals you could get.