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My adjustable rate mortgage
Old 06-02-2008, 01:28 PM   #1
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My adjustable rate mortgage

So I have a 5 year ARM. My 5 yr fixed period ends on Aug 1st. My current rate is 3.75%. Im looking into all of my refinancing options.

My mortgage can increase a max of 2% per year to a max of 8.75%.

Im trying to figure out what my new rate will be if the rate was resetting right now. Here is the exact wording:

"The adjustable rate will will be based on an index. The index is the weekly average yield on United States Treasury securites adjusted to a constant maturity of one year, as made available by the Federal Reserve Board. The most recent index figure available as of the daye 45 days before each Change date is called the current index.

Before each change date, the note holder will calculate my new interest rate by adding 2.75% to the current index. It will then be rounded to the nearest 1/8 of one percent (.125%)........."

So is my mortgage indexed to the 1yr treasury bills which right here
Treasury Bills | Constant Maturity Index Rate Yield Bonds Notes US 10 5 1 Year Rates
shows to be 2.09% which would put me at 2.09 + 2.75 = 4.84% and then rounded up to 4.875%? Or am I looking at the wrong index?

Im getting close to the 45 day mark so whatever the rate is in the next 2 weeks or so will be the rate I be using. I just dont know if Im looking at the right index or not.
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Old 06-02-2008, 01:42 PM   #2
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The base rate is the 1 year CMT (constant maturity treasury), which you can see here: Live Mortgage Rates and Best Rate Guarantee or Wholesale Pricing

As I write this, it appears that the 1 year CMT is 2.22%, so your adjusted rate would be 2.22% plus 2.75%, rounded up to 5%. In today's mortgage market, that isn't a terrible rate. Were I in your shoes, I would view it as giving me a year to figure out what comes next. Watch those rates...
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Old 06-02-2008, 01:50 PM   #3
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The more I read the more it seems like this
1 Year CMT | Constant Maturity
is the index that I should be looking at.

Its currently at 1.74% which would put my new rate at 4.5%. Comments?
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Old 06-02-2008, 01:52 PM   #4
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Well, I posted before reading your response Brewer. I guess its moved from 1.74% to 2.22% in the last week?
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Old 06-02-2008, 01:53 PM   #5
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The short end of the curve is flopping around a lot, so looking at the same indicator at different dates will give you significant differences in rates. How about calling up your lender and asking what they think the rate is?
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Old 06-02-2008, 01:56 PM   #6
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Tried that. The customer service person was much more clueless than I am. I guess I'll call back when I have a bit more time and ask for someone who knows what an "index" is.
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Old 06-02-2008, 02:22 PM   #7
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I got thru to someone who knew what they were talking about. They directed me here:
FRB: H.15 Release--Selected Interest Rates--June 2, 2008

The correct number is down about 1/2 way where it says "treasury constant maturities" and then under that is the "1 year" numbers.

The next to last column to the right shows the weekly average which is what I need. My rate locks in on the week ending 6/20.
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Old 06-02-2008, 02:31 PM   #8
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One one of my rentals I have a 5/1 ARM that can only adjust max 2% a year. My recommendation is take your current rate add the 2% to it and reamoritize over 25 yrs since the first 5 will be gone off the loan. That is how mine worked.

My position was I let is adjust and have a year to decide what I want to do. I think they give me 60 days notice anyway.

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Old 06-02-2008, 02:44 PM   #9
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Bingo: now you have your index to watch.

But I would still start shopping. Keep an eye on Pen Fed. If you want another ARM, I would seriously think about the 5/5 loan they offer. Check out the margin when the rate resets.
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Old 06-04-2008, 05:19 PM   #10
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FWIW, my 5 year ARM mortgage hit the 5 year mark last month.

Over the past 5 years, my mortgage has been moved around a bit. About a year ago, I was notified to start paying Citimortgage.

About 2 months before my ARM was due to change, I called Citimortgage to find out what my options were. They refused to discuss it. They just said, 'Wait for a letter in the mail'.

About 2 weeks later, I got a letter saying that Citimortgage was not going to change my rate (4.75%) for another 12 months. So my payment remained the same.

The point is, I worried a lot about refinancing and eventually did not have to do anything.
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Old 11-10-2008, 12:42 PM   #11
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Since I started this thread and it got bumped, I guess I will update my situation. I got a home equity loan thru Pen Fed locked in at 4.99% for 10 years and paid off my original loan that had the 5 yr ARM. I couldnt be happier.
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Old 11-10-2008, 02:57 PM   #12
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Sounds good. Q: Do you know what the 30 year fixed were going for at the time? I assume your ARM is based on 30 years?

-ERD50
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Old 11-10-2008, 03:23 PM   #13
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What happened to the post from the MSN Money reporter?

I believe the 30 yr fixed was a tad over 6% when I signed off on my Pen Fed deal.
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Old 11-10-2008, 03:25 PM   #14
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Quote:
Originally Posted by utrecht View Post
What happened to the post from the MSN Money reporter?
ARM info needed for article
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Old 11-10-2008, 03:26 PM   #15
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The administrator moved it because it deals with a different subject. It's now retitled somewhere on the site as article information request. It's good to hear that you were able to resolve your situation utrecht.
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Old 11-10-2008, 03:38 PM   #16
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Quote:
Originally Posted by utrecht View Post
I got a home equity loan thru Pen Fed locked in at 4.99% for 10 years and paid off my original loan that had the 5 yr ARM. I couldnt be happier.
Quote:
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I believe the 30 yr fixed was a tad over 6% when I signed off on my Pen Fed deal.
Great. So you got ~ 1% discount. The bank got some freedom from not being locked into a rate for 30 years ( and it was worth 1% to them). Sounds like a win-win, when the situation fits your needs.

This is why I get a bit upset when people want to "get rid of ARMS". Heck, it's a good choice for some. Don't take away the option, just because some people don't think it through.

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