Mortgage Questions

[Scarpozzi]

I bought my house in 2004 on a 5/1 ARM @5%. I did this because the APR was 1.4% lower than anything I could get elsewhere. I can refinance through the same mortgage company on a 10 year fixed @ 5.25% and my closing costs would be pretty low...plus they can lump them into the new loan.

My question....should I hold out until December of 2009 before I refinance or do you think the rates are going to continue to climb over the next 2 years? It's easy to say they will in the short run, but I wonder what's going to happen with new administration and whether or not a new economic climate can lower market risk enough to help the rates.

I'm kicking myself because I didn't do this last week before the rates started climbing again.

 

[FoBoT]

i would do it now, before chaos rules the credit markets and no home loans are available, at any price/%


*don't read this link if you are easily frightened by scary things*

http://www.telegraph.co.uk/mon...08/03/03/ccview103.xml

 

[kranky]

By historical standards, a 5.25% mortgage is very good. I would grab it especially in today's uncertain environment. If rates drop significantly in the future, you can always refi then.

 

[Capt Caveman]

Rates have dropped since the upsurge from a couple of weeks ago. I would recommend refinancing now.

 

[Scarpozzi]

Originally posted by: kranky
By historical standards, a 5.25% mortgage is very good. I would grab it especially in today's uncertain environment. If rates drop significantly in the future, you can always refi then.

It's the refi costs that steer me from changing up too frequently. The credit union will meet again this Wednesday to decide what to do with the rates....so I'm interested in locking in before then, if possible.

 

[Mill]

Originally posted by: kranky
By historical standards, a 5.25% mortgage is very good. I would grab it especially in today's uncertain environment. If rates drop significantly in the future, you can always refi then.

Agreed. Do it now.

 

[FreshPrince]

I would do it now....

history has shown us that election year = increase in interest rates

I know the two don't go together, but one usually affects the other...

pull the trigger!

 

[LegendKiller]

Originally posted by: FreshPrince
I would do it now....

history has shown us that election year = increase in interest rates

I know the two don't go together, but one usually affects the other...

pull the trigger!

Correlation does not infer causation and your correlation is not very good since several points in history show you are wrong.

 

[Demon-Xanth]

10 year 5.25%? If you can afford the payments, hit it like a baby seal.

 

[FreshPrince]

Originally posted by: LegendKiller

Originally posted by: FreshPrince
I would do it now....

history has shown us that election year = increase in interest rates

I know the two don't go together, but one usually affects the other...

pull the trigger!

Correlation does not infer causation and your correlation is not very good since several points in history show you are wrong.

link

do you have any prove that in any of the last 50 years, rates have lowered during election years?

I am not in finance, but everyone I know in that field, always tell me to buy CD's during election years but hold on houses. what do I know..I work in IT ;P

 

[Scarpozzi]

Originally posted by: Demon-Xanth
10 year 5.25%? If you can afford the payments, hit it like a baby seal.

I could afford a 5 year, but I'm paying for my wife's apartment costs at her college....at least until august. At that point, she'll be doing her rotations and I'll be able to double up on payments.

 

[mshan]

What's your ARM adjusting to? And what is it indexed upon?

ARM is not necessarily a bad loan, it's just that some particularly bad ones (pick a payment, interest only, negative amortization) loans were sold to a lot of people who never really could afford a house anyways.

If you've got stellar credit, full documentation, ample equity in home, I'm guessing that there are very good rates even for 15 or 30 year loans out there (I saw 5.625% at par for 30 year fixed with 20% down, but this was only for military in navy fcu. I think comparable 15 year fixed is typically 0.25% lower, so I'm guessing your 10 year rate is good, but it is not necessarily amazingly low). But you should really compare to where your current loan is and where it might be headed (e.g. what is it indexed to, what types of caps does your loan have, etc.).

And even if the mortgage company can lump closing costs into your refi, you're still paying these costs (and interest on additional loan amount), so pay attention to what they want to charge you to refinance your loan. I still a newbie at these mortgage stuff, but I think remember reading that interest rates needs to fall at least 1% before considering refinance (this would be fixed to fixed, though).

I found this mainstream book very helpful while learning about mortgages recently:
http://www.amazon.com/Mortgage...&qid=1204578497&sr=8-1

Other question is how long do you anticipate living in this house?

 

[LegendKiller]

Originally posted by: FreshPrince

Originally posted by: LegendKiller

Originally posted by: FreshPrince
I would do it now....

history has shown us that election year = increase in interest rates

I know the two don't go together, but one usually affects the other...

pull the trigger!

Correlation does not infer causation and your correlation is not very good since several points in history show you are wrong.

link

do you have any prove that in any of the last 50 years, rates have lowered during election years?

I am not in finance, but everyone I know in that field, always tell me to buy CD's during election years but hold on houses. what do I know..I work in IT ;P

if you look at that data they point out 12 election cycles. Out of the 12, there are 4 periods of October cuts, 6 periods of cuts happening at some point in the cycle.

Keep in mind that the cuts or raises are in response to situations happening outside of the elections. This is akin to the historical "correlation" of the NFC winning and us going into a recession or the opposite (I forgot which).

Where in this election cycle do you see rates going up? I don't think we'll see rates going up now for at least a year, perhaps 2.

Correlation does not infer causation.

 

[ranmaniac]

Originally posted by: FoBoT
i would do it now, before chaos rules the credit markets and no home loans are available, at any price/%


*don't read this link if you are easily frightened by scary things*

http://www.telegraph.co.uk/mon...08/03/03/ccview103.xml

qft

 

[mshan]

Before you do anything, figure out exactly what's going on with your current ARM: http://www.federalreserve.gov/.../arms/arms_english.htm

30 year fixed rates (I'm guessing high 5 to low 6 % range) are still well below where they were last fall (6.5 - 6.75%), and are creeping back upwards after swooming down ever so transiently to 5.25% (30 year fixed, not 10 year fixed, which I'm guessing should typically be at least 0.25% lower in rate) when there was that global stock selloff when Societe General unwound all of those positions of that rogue trader they had. Lending standards are apparently much tigher, and I believe Fannie Mae has instituted a new 0.25% discount point charge for anyone with a credit score less than 680.

Credit spreads (historically 1.5 - 1.75% above 10 year Treasury Rate) have widened because of subprime credit crisis, so even if Fed lowers rates, the lower cost of money doesn't necessarily get passed on to end user (you, the fixed rate mortgage borrower).