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Profile picture for tellpam

How do I determine when to refi? My ARM just reset lower than current rates, but only for 1 year...

My current payments are really do-able, and my interest rate is nearly a full percent lower than most of what I see available....My condo value (according to zestimate) is 15% lower than when I purchased, and I'm worried that if rates go up while value is still falling, I may not have enough loan to value ratio to qualify for refinancing later. But, I really don't want to pay fees and higher interest rate just to lock in. Refi calculators don't seem to work for the situation I'm in.

  • November 28 2009 - Los Alamitos
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Answers (2)

Profile picture for Bentley Advisors
You need to determine your risk profile.  How comfortable are you w/ rates rising and a possible continuation of declining value?  At some point, rates will rise.  If you intend to stay in your home < 3yrs, I might advise you stick w/ your yearly adjustments.  Otherwise, it would be prudent to lock in a longer-term fixed rate period loan if you wish to avoid interest rate risk. Sadly, there is no calculation for risk tolerance.  Each individual must determine this on their own.  I would, however, encourage you to play out the worst-case scenario before you make your decision.  Good luck.
  • November 29 2009
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and I'm worried

What is it worth to not be worried? Yes, your adjusted rate is great but at least you realize it is only for 1 year. The key to your situation is how many more years do you want to own this property. Even if your value holds from here, rates will go up in the future and if you wait to react until the next adjustment it may be 1 point higher than current rates, no one can know for sure. If you will own for more than 7 more years then you should go to a Fixed rate. If 7 years is a large enough window, then look at a 7/1 Arm and compare quotes with No Origination or Discount points to quotes with an Origination Fee.   
  • November 28 2009
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