Refi now or wait?

[keniz138]

What is the name of your state? Rhode Island

Hi all, I am really on the fence here. Currently have 2 loans:
1. $260K 30 year 7/1 ARM that I owe $246K on, 5.5 rate, fixed rate ends in 3 years
2. $65K 15 year loan that I owe $64K on, 6% fixed rate, balloon pmt at 15 year mark

Off the cuff, my house is worth $375K, so I'm only at about 15% equity. For argument's sake, let's say we plan to stay in the house for another 10 years.

I have been offered several options for a consolidated refinance.
1. A 30 year fixed lender paid PMI loan at 6.125
2. A 30 year 7/1 ARM at 5.375

My payments with both of these options would be roughly the same as what I am paying now, but I am hesitant because of the several thousand dollars in closing costs as well as the possibility of the rates going down even further. The paranoid side of my personality, however, is worried that rates in 3 years (when my fixed rate expires) are going to be much higher than now.

Thoughts?

 

[seniorjudge]

My thoughts:

Get a fixed and do NOT get an ARM.

Refinance now; rates are historically low.

(I do not loan money...sorry.)

 

[LindaP777]

Sorry, what was your REAL ESTATE LAW question? I missed it.

 

[Grandma's house]

quote: The paranoid side of my personality, however, is worried that rates in 3 years (when my fixed rate expires) are going to be much higher than now.

This is her futurelaw question that she may end up in foreclosure due to these A.R.M.'s. In 3 yrs. you ought to considering the worst case in rates and this is not being paranoid at all. 3 yrs. is a very short period in the life of mortgages.

No one should ever take a 3/1, 5/1 or 7/1 arm when they know they are going to stay in the house for 10 yrs.
These are great if KNOW you are not going to. However if you are planning on selling in the future...then you ought to consider todays rates and take an FHA 30 yr. fixed. This is a good selling tool as it is assumable. You can also streamline refi. if the rates do come down thus little or no c.c.'s
Do a combo. 30 yr. fixed go FHA and go for the rates today of 5.875% pay 1 point max and pay the NON lender PMI. FHA will not recognize that 2nd mtg. of yours as "cash out" (unless a heloc that you have used in the last 12 mos.) conventional lenders will consider it cash out and will not exceed 90% ltv and therefore your rate will be higher and the PMI factor too.
Go with an FHA approved broker/lender. Get out of that foreseen rate adjustment in a mere 3 yrs. rates are at their best...

 

[keniz138]

Thank you G's House.

 

[keniz138]

Hmmm...it seems the game has changed. The appraisal came back and it looks as though I am only at just over 10% equity.

Options (APR on my current 7/1 ARM is 5.5% and expires in 3 years) :

1) Get into a 30 year fixed, I would end up paying about $35 more/month than I am now and would have a 6.375 APR (lender paid PMI)

2) Take a 7/1 ARM at 5.375 for 80% of value plus a home equity loan at 8.00 for 20% of value (either a 15 year payoff or a 30 year schedule, 15 year balloon)

3) Stay where I am and watch what the rates do over the next couple of years and hope for the best.