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Is it worth it to get a refi on a 5/1 FHA ARM at 3.85%? I'm in the 4th year of the ARM

I owe $380000.  The house is worth $420000.  My total payment is $2512. 
  • March 10 2014 - Rockville
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Answers (9)

Your main concern is probably that the ARM will adjust in the future.  As was mentioned, you need to know how long you will remain in the property or when you might sell, and what is your tolerance for future rate increases.

Check your note, but most 5/1 ARMs adjust annually after the first 5 years using the LIBOR index plus a fixed margin such as 2.50%.  The 1 year LIBOR is now 0.555, and adding to a typical margin will give you a rounded 3.00% rate if your loan is adjusting now.  This will be good for a year, then adjust again a year later based on the new LIBOR at that time.  The LIBOR index is now about the lowest it has ever been.

The second issue is that your loan to value ratio is 90.48%.  So, you will need mortgage insurance, FHA, or find a lender that will do an 80% first, and 10% second loan.  With the 80/10 financing, you will have to cover the excess over 90% and closing costs, or choose a higher rate to cover these.
  • March 11 2014
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It depends on how long you plan to remain in the home. If it's a long term place for you, then it may be worth your peace of mind to look at a fixed rate. Also, as Ray mentioned, consider looking at a conventional loan.
  • March 11 2014
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Why do an FHA loan with upfront mortgage insurance and monthly mortgage insurance when you may be able to get a lower-cost mortgage by doing an 80% 1st and a 10% 2nd without any mortgage insurance?
  • March 11 2014
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to see if you can get started on financing a new home.
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in other words, why bother refinancing when you can get started on financing a new home.



.....and seriously, in my opinion getting or keeping an ARM is a comfort thing, if you're comfortable with it, keep it, if you're losing sleep over it then refinance.
  • March 11 2014
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I recommend that if you plan to live there long term, you should refinance into a fixed rate mortgage. It can be very risky to have an adjustable rate when you live in the home long term. If you plan to sell the home within the next few years, then a refinance may not be as necessary. Although rates have risen a little bit, they are still relatively low. So you should take advantage of these low rates. So the best thing for you to do is to speak with a knowledgeable lender to see if you can get started on financing a new home. If you need additional assistance, feel free to reach out. Good luck!
  • March 11 2014
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Profile picture for Dan Tabit
Anita,
What are your plans for the future?  Do you want to stay long term or are you planning to sell in a year or two?  If you want to be there 10 years or more, get longer term fixed rate loan.  Rates have come up from the recent lows, but are still historically great.  If you plan to sell in 3-5 years or less, do the math?  Will it pay for itself in a reasonable time frame or will you be out your closing costs and origination fees?
  • March 10 2014
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Absolutely !!

Too many options to discuss on this forum - I have been living in Rockville and providing financing in MoCo for over 20 years. Easy to reach via my profile and working for the rest of the evening.  
  • March 10 2014
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What are the lender fees involved and is there monthly mortgage insurance? Depending on your credit, that rate seems like it may be high.  If you would like to contact me through my profile we can discuss further
  • March 10 2014
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What is your current rate and term?  How long do you plan on living there?
  • March 10 2014
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