Asking the experts: Refinancing?

[HaleyB]

Don't be fooled by low closing costs, many lenders roll fees into the loan. So it looks like a great deal but you are paying 15, 20, 25, or 30 years of interest on those fees.

Those ARMloans are very popular. But you will never see fixed rates this low again (I hope not, really) so when it comes to loans don't forget to look at the big picture. You should always know your break even point on the loan. Price out everything and get a few good quotes, if you see anything on your credit that is neg. because of loan shopping take steps to correct it right away. That is just always true. Protect your credit.

 

[HaleyB]

Regarding the question about Points...

Why would the one year be a factor in favor of considering it?

I thought that in general you pay points to buy down a loan that you plan to have for a long time.

Of course run the numbers, but I doubt that will make you come out ahead if you are looking at only one year.

Watch that break even point

 

[crisi]

Originally posted by LOVETHATMOUSE
what about ARM rates? Aren't they too risky?

Depends.

We have a seven year ARM. The initial interest rate was about 1.5 points lower than the 15 yr mortgage. It adjusts once - at seven years.

But the loan will be paid off before seven years is up. So little risk - unless we elect not to pay off the loan for unforeseen circumstances (like too many Disney trips, or getting laid off).

 

[disneymom3]

ARMs can really vary too. You'll want to make sure you understand how much it can go up both annually and what the cap is on the total interest rate. For us, an ARM was a good way to go. It lowered our interest rate for 7 years and I cannot see us living in this house for any more than 5. Now, granted something may happen that prevents us from moving. The housing market in MN may self correct for example, but even if we don't move within the time of the lowest rate, we have an annual rate cap of 1% and a total rate cap of 5%. Our loan is currently at 4.75% and I know a lot of people who bought their houses in the 80s that would have thought 9.75% was a steal so I don't feel too worried about that.

The big thing is to make sure you know what you are getting into! If something doesn't sound right, question it!! There are plenty of mortgage brokers and loan officers out there and they work on a comission basis, so find one who WANTS your business and will work for you!