I got a PenFed 5/5 ARM in July 2010 - 3.75%. I've been monitoring the current rates - today it is at 2.5%. The fine print says an existing PenFed 5/5 loanholder can't simply refinance to the new, lower rate - even paying closing costs and an origination fee. (Well you can if you increase your mortgage by $50K
There is some fine print that says you CAN re-adjust to the new rate for 1% of the outstanding balance. So the re-adjust will cost me about $1880 upfront and save about $128 per month until July 2015. In July 2015, the rate will adjust up using the new lower 2.5% baseline to 3.5%. The PenFed rep says it's just a couple of pages of paperwork by fax to get this going. but they have a 4 week backlog to even get started. So I guess the Sept. 2013 payment would be the starting point. (So about a 15 month payback period.)
DW and I don't ever want to actually own this boat anchor. Our plan is to be out in 5 years and into our vacation home that we will retire to.
Can anyone see why the re-adjust is not a good use of $1880?
Thanks in advance for any comments or suggestions.......