Mortgage rates headed down - time to refi?

[brewer12345]

APRs are effectively meaningless for ARMs of any flavor. Just look at the rate for the fixed period, bumped up by whatever your up front cash costs to refi turn out to be. After that, it is just a straight index plus margin equation, with any caps taken into account. I usually model worst case and expected case to see what the loan really looks like.

 

[TomCat]

APRs are effectively meaningless for ARMs of any flavor. Just look at the rate for the fixed period, bumped up by whatever your up front cash costs to refi turn out to be. After that, it is just a straight index plus margin equation, with any caps taken into account. I usually model worst case and expected case to see what the loan really looks like.

So does that mean that the Pen Fed 10/1 is actually 5%+ for the 10 years fixed and the APR of under 4% is somehow computed beyond the 10 year "lock"?

BTW...if I were to sign up for an adjustable...I would essentially be only concerned about the "locked" years as I would plan on paying off IF adjustable rate were not to my liking at the end of the lock period...Tom R

 

[brewer12345]

So does that mean that the Pen Fed 10/1 is actually 5%+ for the 10 years fixed and the APR of under 4% is somehow computed beyond the 10 year "lock"?

BTW...if I were to sign up for an adjustable...I would essentially be only concerned about the "locked" years as I would plan on paying off IF adjustable rate were not to my liking at the end of the lock period...Tom R

That is my understanding. APR disclosures are formula-driven according to consumer protection regs and therefore are totally useless for ARMs and misleading for fixed loans. So look at the rate during the fixed period. Frankly, byond 5 years in ARM land it looks to me like one woudl be beter off with a fixed mortgage given relative rates.

 

[thefinancebuff]

Such as?

ING Direct: 5/1 ARM, 3.99%, $395 lender fee.
NMA: 5/1/ ARM, 4.00%, -$421 lender fee, $874 total closing cost after lender credit (closing cost depends on which state and size of loan; used 150k in CA as example)

 

[brewer12345]

ING Direct: 5/1 ARM, 3.99%, $395 lender fee.
NMA: 5/1/ ARM, 4.00%, -$421 lender fee, $874 total closing cost after lender credit (closing cost depends on which state and size of loan; used 150k in CA as example)

Thanks. Had seen ING, but had not run across NMA before. I am frankly leery of the 5/1 structure and have some employment related restrictions on who I can borrow from, so I will be watching and waiting.

 

[TomCat]

T I am frankly leery of the 5/1 structure

Brewer...other than making sure you have the effective rate correctly calculated and are prepared to pay off the loan at 5 years...what other concerns? Thanks Tom

 

[brewer12345]

Brewer...other than making sure you have the effective rate correctly calculated and are prepared to pay off the loan at 5 years...what other concerns? Thanks Tom

Frankly, my main concerns are that the world is an uncertain place and I have no idea what life will be like in 5 years. So I desire less risk when it comes to debt obligations, especially when the marginal cost for lower risk is small. Its essentially the same reason I keep a large HELOC in place even though I rarely use it: option value in case of troubles.

 

[WanderALot]

I have 7 years left on a 5% 15 year loan, balance about 110K. If I take a 5/1 or a 5/5 loan, it'll be close to be paid off at the end of the fixed term provided I make the same payments that I'm making now. So, I was thinking if I can get something in the 4 - 4.25 (such as the ING direct rate of 4), wouldn't this be sorta of a no brainer? Anything I'm missing?