Profile picture for tcorp

I have a 7yr IO ARM @ 4.5%. Considering going to a 3.875% 10yr IO ARM for $417K. Should we?

I have a 7yr IO ARM @ 4.5%. Considering going to a 3.875% 10yr IO ARM for $417K in CA. It will cost 1pt and fees around $2500.  So I figure $7K total costs.  From current payment it will take 28 months  to recoup costs.  Does this make sense to do?  I am thinking yes since it gets me the extra 3 years locked in at the lower rate.  Opinions please.
  • July 21 2010 - Livermore
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Answers (17)

Profile picture for tcorp
$550K according to Zillow.  No buy down.
  • July 22 2010
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Profile picture for tcorp

I would consider 30yr fixed if the payment does not go so much higher and the cost/fees are not to high as well.  I am willing to look at any offers anyone on this board has for a 30yr fixed.  Does anyone know of a 30 year fixed IO?  Or does 40yr make any sense?

  • July 22 2010
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Profile picture for Debbie Holmes
Why not go fixed.... So much safer...
  • July 22 2010
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Yes, the refinance makes sense.   Those terms are absolutely awful, but rates are so low that even a bad offer is better than nothing...marginally. 

You clearly have a better option--get a better rate, no points, and less fees. 

I'd love to give you my opinion, but I'd be the 10th person spouting my  prejudices of ARM v. Fixed.  None of us can give good advice without talking through that next home & why.  For example, if your next home is because you're adding family or because the nest is going empty, you probably have life events that should be aligned with your mortgage choices.  Do I like I/O loans?  It depends on the "why."

"I like low payments"=bad reason
"I'm dumping that $600/month into Timmy's college fund instead of principal"=good reason

Yes, a refinance makes sense, but that refinance is probably iffy. 

Just my $.02,
Chris
  • July 22 2010
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If Bernanke keeps answering questions we may be at 2% by 6:00 PM
  • July 21 2010
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Profile picture for Mr Caveat
no, you shouldn't. 2 million people are losing there home THIS YEAR because they did what you are doing, ie refiing every 6 months, choosing low rates in the short run only to have the interest rate jump when it ends, and there will be nothing yo can do when the time comes. rates will probably be in the 7s.

and didnt you just get that loan less than 28 months ago? do you ever plan to own your home? or do you just enjoy the privilege of renting it from the bank?

if you are going to refi, get a 30 yr fixed and be done with it, especially since you are going to be keeping the unit as a rental. 4.3% is a pretty darn good rate.
  • July 21 2010
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I agree with the Clay, I like the idea here, but the rate/fee structure is off.   The 10/1 offers large closing cost credits for rates only slighly higher.   For a 417,000 loan, you can avoid the point for maybe .25 more to rate, and avoid all the fees for .375 or .5 above what your quote is.

Keep in mind that if you are doing a Fannie Mae loan, you will need 24 months of fully amotized payments in reserves to be eligible for this program.

  • July 21 2010
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you can get a rate of 4.375% on a 30 Year Fixed with no points. This is based on the property type being a single family home with property taxes and homeowners insurance included in the monthly mortgage payment.
  • July 21 2010
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Tcorp-


Call this guy and request a GFE.  He is in CA and will beat that deal.


Greg Denny

Phone:   (800) 335-6897

Mobile:  (707) 631-4821

Fax:      (858) 761-0346
 

  • July 21 2010
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Profile picture for tcorp
How about a 4.3% 30yr fixed with 1pt origination?
  • July 21 2010
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Depending on when you established your existing 7/1 I/O, underwriting guidelines may have changed to a lower max LTV and much higher reserve requirement so you may want to verify those 2 things before ordering an appraisal.  
  • July 21 2010
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That pricing is from the same lender? 3.875% and 1 origination point is good, 4.875% and no origination is way out of scope.
  • July 21 2010
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Profile picture for tcorp
The rate for no points is 4.875% so my current monthly payment would go up!
  • July 21 2010
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If you will only hold the loan for 10 years or less ask if you can get the 10/1 I/O at 4% with no origination fee, payment only $30 more per month but only finance $413K. Closing cost recapture at 13.6 payments.

  • July 21 2010
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Yes, 3 more years and save about $220/month. If you plan to hold the rental long term then I would get a 30 Yr fixed.  
  • July 21 2010
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Profile picture for tcorp
Plan on staying here 4 years then renting out.
  • July 21 2010
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That offer appears to be very competitive. How long do you plan on living in your home? Do you plan on making additional payments towards principal for term reduction? Its best to see it compared against a 5 & 7 Year I/O and even a fully amortized payment to determine a suitable fit.
  • July 21 2010
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