Profile picture for user74784960

Good time to refi a 5/1 30yr adjustable rate mort into fixed rate?

I'm 10 years into a 5/1 30 year adjustable rate mortgage. The last 5 years have been great as the interest rate on it has continually dropped. It's sitting at 2.875% right now. The balance is roughly $200K. I also have a HELOC that is also at 2.875% with a balance of roughly $75K. Since fixed rates are pretty good right now I've started the process of refinancing, but am now having second thoughts. The reason for the refi was to payoff the HELOC and get into a fixed rate since interest rates have started to move upwards. In mid-2016 the HELOC will convert to a fixed rate 10 year loan so I'll have to do something by then. I'm wavering because I wonder if I should keep taking advantage of the current low adjustable rates for now and see what happens to the rates as 2016 approaches. Does anyone have some advice? Thanks.
  • April 26 2014 - Los Angeles
  • 0
    0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

Answers (5)

A 30 year fixed rate mortgage is really something you only want to consider if you intend on staying in the property & loan long-term. If you don't believe you will, a new 5/1 or the more popular 7/1 may be a better option for you to consolidate the two loans. Most people like the idea and psychological aspects of a 30 year fixed mortgage, however they don't stay in the loan long enough to justify the added cost of this type of loan. They refinance or sell. Because your HELOC is set to mature, it is a good time for you to explore options and get s free analysis to determine mathematically how you can benefit. With the current volatility of the market and based upon where your HELOC rate will be when it matures along with the adjustment caps on your first mortgage annually should be part of the analysis, which should ultimately help you make your decision. All the best!
  • April 29 2014
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Hello, 
You're correct that ARM borrowers have enjoyed a remarkable run of low interest rates that will eventually end.  It's always a bit of a dilemma for borrowers who are on low rate ARMs to decide whether to refinance.  Since your loan is also a cash out (if you're paying off a HELOC that wasn't used exclusively for the purchase of the property), there are additional pricing adjustments for the new loan.  

I've had many ARM borrowers who opted for a new ARM to lock in a low ARM rate for another 5 , 7, or 10 years.  Keep in mind that there are new rules for borrowers on 5 year ARMs, often folks choose 7 years instead.

We offer cash out loans with adjustable rates up to 80% of a home's value.  Many lenders are capped at 75%, that's certainly something to consider in your case if you do choose to look at a new ARM.  I write loans in all states, would be glad to discuss your situation. Feel free to contact me through my profile.

30 year fixed rates are now in the 4.375% to 4.5% range.  Whether it's worth raising your rate 1.5% for the predictability of a fixed rate is a question only you can answer.   
  • April 27 2014
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for CA Direct Lending
Robert has some good advice.  If you plan to live in this home for more than 10 years or plan to move and convert it to a rental, I would consider a 30-year fixed.  If you are unsure how long you'll be in your home, I would consider another ARM product if the interest rate is lower than what you are currently enjoying. 

You can always refinance your HELOC before it matures.  The best I know of right now is with Schwab at 3.99% with interest-only payments.  There's no need to refinance your 1st just to avoid the maturity of the 2nd.

And, I NEVER recommend a 15-year fixed.  You can always choose to make additional principle payments (which I don't recommend.  I have a better strategy for shortening your mortgage.)  With a longer-term mortgage you can decide how much you want to pay rather than being forced by your mortgage lender to make a higher payment every month. 
  • April 27 2014
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Hi,

While fixed rates are great and low right now, hybrid-ARM rates are even better, such as a 5/1 or a 7/1.  There are factors to consider, such as how much longer you plan to keep this home, as well as your comfort level with an adjustable loan.  Since you've had one for the past decade, clearly you have an understanding and a comfort level with ARMs that most people don't.  I would ask your lender for quotes for the ARM programs to compare with the 30 year and 15 year fixed, then decide what's best for your scenario.

With the HELOC maturing in a couple of years, I definitely think that rolling the two loans together is a good strategy.  Now it's just a matter of choosing the right loan for your scenario.

Good luck!

Robert
  • April 27 2014
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

If you can handle a 15 year fixed rate mortgage payment, I would definitely recommend refinancing now. The interest rates are very low and no one knows for sure where rates will be in 2016. Depending on your particular situation, 15 year rates are around 2.875% - 3.125%, with APR's 2.922% - 3.189%.

Best regards,
Elva

  • April 26 2014
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.