refinancing my home

[Yax]

So I've come to the realization that Fixed rate isn't what I want in a home loan so I'm refying.

Here's the deal:
I pay about: $2700/month fixed 2 loans, 7.125% first and 9.5% second on 300K.

If I refi,
I'd be paying about $1K/month on an IO Liber Arm at 3.7% rate

If I refi with a CD rate,
I'd be paying about $1.3K/month with about 4.75%

The difference is that the second option's rate is alot more stable than the first one since its based on the value of 3 month CDs. The first arm is based on the LIBOR index which can fluctuate faster, but has been lower.

Gotta decide which one's more beneficial to me. I'm not going with fixed because in a year, I could save over 15K with the arms so that leaves two choices.

 

[Ameesh]

you can still get a 5/1 arm or a 7/1 arm for under 5%


i tend to agree with you, i got a 7 year adjustable on my place and i know i wont be here for that long.

 

[Vic]

The Fed will raise rates as early as August, and they won't be coming back down anytime soon. Just FYI.

 

[DuffmanOhYeah]

Go for an IO ARM and refi every 7 until you are dead.

 

[Vic]

Originally posted by: DuffmanOhYeah
Go for an IO ARM and refi every 7 until you are dead.

May as well rent.

 

[mrbass]

yeah 4.6% is about right. Definitely do it if you plan on not being there/owning it for more than a few years. Otherwise it's foolish.

 

[Yax]

Originally posted by: Vic
The Fed will raise rates as early as August, and they won't be coming back down anytime soon. Just FYI.

Feds raising rates won't affect mortgages as people think. The Libor is based on London's bank rates.

Also, raising rates won't increase 3 month CD values so I fail to see the connection there too.

How high can 3 month CD values go up to? Right now its like 1.011% return and has anyone ever seen it go beyond 4%?

 

Originally posted by: Vic
The Fed will raise rates as early as August, and they won't be coming back down anytime soon. Just FYI.

Bingo.

These hoards of ARM's holders out there are going to mean big big buck for the banks in the next 5-10 years.

 

[Yax]

Originally posted by: mrbass
yeah 4.6% is about right. Definitely do it if you plan on not being there/owning it for more than a few years. Otherwise it's foolish.

Why is it foolish?

If you go fixed, you'd eventually refi to cash out to add on to your home or for other reasons down the road. Most people refi within 5 years anyway. I'm doing it now and its only been 3 years. I don't think I'm the 1% who won't refi ever so I don't think its foolish unless you can think of some reason I haven't considered?

 

[dartworth]

Originally posted by: Vic
The Fed will raise rates as early as August, and they won't be coming back down anytime soon. Just FYI.

Even with the election coming up?

 

[DuffmanOhYeah]

Originally posted by: Vic

Originally posted by: DuffmanOhYeah
Go for an IO ARM and refi every 7 until you are dead.

May as well rent.

No way! Those interest payments are tax deductible. In effect, its like you never pay a dime. Let your capital float in the market, not sit in a house that will get you like a 3.5% return.

 

[Yax]

Originally posted by: SampSon

Originally posted by: Vic
The Fed will raise rates as early as August, and they won't be coming back down anytime soon. Just FYI.

Bingo.

These hoards of ARM's holders out there are going to mean big big buck for the banks in the next 5-10 years.

FYI, the bank that loans you the money won't make a bigger profit if the interest rates go up. They're profit is based on a margin above the rate they can get the money and that margin stays constant so they make the same amount of money whether the rates go up or down.

 

Originally posted by: cheapbidder01

Originally posted by: mrbass
yeah 4.6% is about right. Definitely do it if you plan on not being there/owning it for more than a few years. Otherwise it's foolish.

Why is it foolish?

If you go fixed, you'd eventually refi to cash out to add on to your home or for other reasons down the road. Most people refi within 5 years anyway. I'm doing it now and its only been 3 years. I don't think I'm the 1% who won't refi ever so I don't think its foolish unless you can think of some reason I haven't considered?

None of these new mortgage holders will be refinancing anytime soon after the rates go up.

It's now or never.

 

[Ameesh]

Originally posted by: SampSon

Originally posted by: Vic
The Fed will raise rates as early as August, and they won't be coming back down anytime soon. Just FYI.

Bingo.

These hoards of ARM's holders out there are going to mean big big buck for the banks in the next 5-10 years.

i don't know many people who stay in the same house for more then 10 years, especially younger people

 

[Yax]

Originally posted by: DuffmanOhYeah

Originally posted by: Vic

Originally posted by: DuffmanOhYeah
Go for an IO ARM and refi every 7 until you are dead.

May as well rent.

No way! Those interest payments are tax deductible. In effect, its like you never pay a dime. Let your capital float in the market, not sit in a house that will get you like a 3.5% return.

Correct. Plus, on the average, home values double every 10 years. That money comes back into your pockets when you sell. Renting means the landlord pockets that money when he sells and kicks you out. Also, you're a slave to the landlord, you'd have to conform to his rules or he can legally kick you out of the home. Things like: no pets, no nails in the walls, suck.

 

Originally posted by: cheapbidder01

Originally posted by: SampSon

Originally posted by: Vic
The Fed will raise rates as early as August, and they won't be coming back down anytime soon. Just FYI.

Bingo.

These hoards of ARM's holders out there are going to mean big big buck for the banks in the next 5-10 years.

FYI, the bank that loans you the money won't make a bigger profit if the interest rates go up. They're profit is based on a margin above the rate they can get the money and that margin stays constant so they make the same amount of money whether the rates go up or down.

Most banks never shelve their loans. They get shuffled off to freddie mac or fannie mae.

 

[Yax]

Originally posted by: SampSon

Originally posted by: cheapbidder01

Originally posted by: SampSon

Originally posted by: Vic
The Fed will raise rates as early as August, and they won't be coming back down anytime soon. Just FYI.

Bingo.

These hoards of ARM's holders out there are going to mean big big buck for the banks in the next 5-10 years.

FYI, the bank that loans you the money won't make a bigger profit if the interest rates go up. They're profit is based on a margin above the rate they can get the money and that margin stays constant so they make the same amount of money whether the rates go up or down.

Most banks never shelve their loans. They get shuffled off to freddie mac or fannie mae.

That's the Fixed loans. The variable ones are usually portfolio loans, that means they keep em.

 

Originally posted by: cheapbidder01

Originally posted by: SampSon

Originally posted by: cheapbidder01

Originally posted by: SampSon

Originally posted by: Vic
The Fed will raise rates as early as August, and they won't be coming back down anytime soon. Just FYI.

Bingo.

These hoards of ARM's holders out there are going to mean big big buck for the banks in the next 5-10 years.

FYI, the bank that loans you the money won't make a bigger profit if the interest rates go up. They're profit is based on a margin above the rate they can get the money and that margin stays constant so they make the same amount of money whether the rates go up or down.

Most banks never shelve their loans. They get shuffled off to freddie mac or fannie mae.

That's the Fixed loans. The variable ones are usually portfolio loans, that means they keep em.

They may not make more, but you pay more.

 

[Vic]

Originally posted by: cheapbidder01

Originally posted by: SampSon

Originally posted by: cheapbidder01

Originally posted by: SampSon

Originally posted by: Vic
The Fed will raise rates as early as August, and they won't be coming back down anytime soon. Just FYI.

Bingo.

These hoards of ARM's holders out there are going to mean big big buck for the banks in the next 5-10 years.

FYI, the bank that loans you the money won't make a bigger profit if the interest rates go up. They're profit is based on a margin above the rate they can get the money and that margin stays constant so they make the same amount of money whether the rates go up or down.

Most banks never shelve their loans. They get shuffled off to freddie mac or fannie mae.

That's the Fixed loans. The variable ones are usually portfolio loans, that means they keep em.

Uhh... no. Fannie and Freddie buy the ARMs too.

 

[Yax]

Originally posted by: Vic

Originally posted by: cheapbidder01

Originally posted by: SampSon

Originally posted by: cheapbidder01

Originally posted by: SampSon

Originally posted by: Vic
The Fed will raise rates as early as August, and they won't be coming back down anytime soon. Just FYI.

Bingo.

These hoards of ARM's holders out there are going to mean big big buck for the banks in the next 5-10 years.

FYI, the bank that loans you the money won't make a bigger profit if the interest rates go up. They're profit is based on a margin above the rate they can get the money and that margin stays constant so they make the same amount of money whether the rates go up or down.

Most banks never shelve their loans. They get shuffled off to freddie mac or fannie mae.

That's the Fixed loans. The variable ones are usually portfolio loans, that means they keep em.

Uhh... no. Fannie and Freddie buy the ARMs too.

Perhaps true, but only conforming loans.

 

[Yax]

Originally posted by: SampSon

Originally posted by: cheapbidder01

Originally posted by: SampSon

Originally posted by: cheapbidder01

Originally posted by: SampSon

Originally posted by: Vic
The Fed will raise rates as early as August, and they won't be coming back down anytime soon. Just FYI.

Bingo.

These hoards of ARM's holders out there are going to mean big big buck for the banks in the next 5-10 years.

FYI, the bank that loans you the money won't make a bigger profit if the interest rates go up. They're profit is based on a margin above the rate they can get the money and that margin stays constant so they make the same amount of money whether the rates go up or down.

Most banks never shelve their loans. They get shuffled off to freddie mac or fannie mae.

That's the Fixed loans. The variable ones are usually portfolio loans, that means they keep em.

They may not make more, but you pay more.

There's a max of like 2% up or down that the interest can fluctuate each year. Also, there's a lifetime cap on variable loans. Besides, I've never seen 3 month CD's increase their returns 2% in any one year. (current case, it would mean that next year, the 3 month CD's would give investers a 3.011% return and I don't think that would happen). I think basing the variable portion of the loan on CD's makes the loan value very stable. And Fed rates don't make CD values go up do they?

 

[Vic]

Originally posted by: cheapbidder01
Perhaps true, but only conforming loans.

Hence the use of the word "conforming", meaning that the loan was underwritten and packaged to conform to Fannie/Freddie guidelines.

Most loans are conforming, whether you know it or not, and conforming loans typically have the best rates and terms.

Far be it from me to give you advice on mortgages when you seem to know so much. Due to the cyclical nature of interest rates, I just happen to think that the time to get a fixed is when rates are low, and the time to get an ARM is when rates are high. Not the other way around as you seem to think.

 

[wyvrn]

Greenspan was right, people would have saved money on ARM's the last 10 years because rates kept dropping. Now, rates are only going to go up. As correctly pointed out, people who fit the average profile of home owners and live 5-7 years in a home should get an arm even when IRs are expected to go up. The breakeven point for a 30 year policy between arm's with caps and fixed fates in a rising IR environment is usually around 10-12 years. If you reinvest the difference in payments back into the loan, it could be closer to 15 years. So generally arm rates are better for people who know they are going to move within that time frame. Otherwise, fixed is better, in the current environment when IRs are expected to go up. For 15 year loans, the numbers change and I don't remember what they are right now.

 

[Yax]

Originally posted by: wyvrn
Greenspan was right, people would have saved money on ARM's the last 10 years because rates kept dropping. Now, rates are only going to go up. As correctly pointed out, people who fit the average profile of home owners and live 5-7 years in a home should get an arm even when IRs are expected to go up. The breakeven point for a 30 year policy between arm's with caps and fixed fates in a rising IR environment is usually around 10-12 years. If you reinvest the difference in payments back into the loan, it could be closer to 15 years. So generally arm rates are better for people who know they are going to move within that time frame. Otherwise, fixed is better, in the current environment when IRs are expected to go up. For 15 year loans, the numbers change and I don't remember what they are right now.

I agree. I'm betting I'll probably, either refi or pay off enough of the loan by that time so the higher rate won't affect my payment much. Or, probably moved to another home, most people tend to upgrade homes after 10 years. That's my gamble I guess.