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I currently have a 5/1 ARM at 4.375 that adjusts in 6 months. Is it worth getting a refi right now?

  • December 30 2008 - San Mateo
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Answers (6)

Mody123,

Good morning. As of this moment, your rate would adjust as follows:

  0.34% 1 Yr CMT (Index)
+2.75% (margin)
  3.09% Adjusted Rate for the next Year

Your adjustable rate is actually scheduled to go down with the next adjustment. Another key fact that you must take into consideration is that if you choose to refinance into another adjustable mortgage, your index would change to the 1 year LIBOR (presently at 2.03%). This is simply because the almost all ARMs are based on LIBOR today.

If you would like to see a brief history of the 1 Yr CMT, visit http://www.thefinancials.com/Samples/i001786v.PDF.

The 1 Yr CMT would have to rise to 1.625% just to get you back to your original start rate. Based on your time frame and the associated costs of a refinance, you may consider riding it out. If your time frame becomes extended and you wish to pre-empt a hugh adjustment down the road...you may reconsider.

Happy Holidays!
  • December 31 2008
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Profile picture for mody123
we plan to live in the home for at least 5 years.  The ARM info is as follows: index - 1 yr Treasury, Margin 2.75, Max first Adjust - 5%, Max Periodic - 5%, Max Lifetime - 5%.  My credit is excellent so I'm not worried about that.  Thanks for the responses.
  • December 31 2008
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Mody123,

Just as Joe referenced, to really compare apples to apples you will need to know the terms of your adjustment first. Just as Ken alluded, qualifying for a new loan is vastly different from when you received your loan in the June of 2004; therefore, will you be able to qualify for the new loan under the stricter guidelines?

One other factor to consider is how much longer do you believe that you will need a mortgage on this home?

Happy Holidays!
  • December 30 2008
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How long do you plan on living there?
  • December 30 2008
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Profile picture for Ken Kopper
Mody, pull your loan paperwork and find out what the index and margin are for the ARM. This will give you an idea if markets remain the same what you could possibly be looking at for as far as rate in 6 months.

Then depending on that possible rate and the next time if would adjust after that would assist you in making a better educated decision.

Also very important would be to determine if you would qualify for refinance even if you wanted to do refi.

Post a loan request through Zillow and you should get some quotes from lenders in your area.
  • December 30 2008
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What are the terms (margin, index, caps) of your adjustment? 
  • December 30 2008
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