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Refi now or Wait for 2012 Refi relief plan?

Our 5/1 ARM Interest Only (non-Fannie May loan) will expire June 30 2012. House value is underwater by at least 30% market value based on an unofficial reappraisal estimate.Should we1. Refi now, before current 5/1 loan expires before June 30 2012?2. Refi after the 2012 Refi relief plan?http://www.nytimes.com/2012/02/02/bu...financing.html3. Just let the term expire and go on the variable rate?My loan terms:ARM 5/1 Interest Only @ 5.875%Index: 1 Year LIBORMargin: 2.25%Assuming my math is correct, and using this:1 Year LIBOR Interest Rate ForecastMargin + new potential Libor rate => 2.25 + 1.05 = 3.3% interest rate. And, I assume I am back to a regular P+I payment.Q: How do I figure out my new monthly payment annually? Assume loan balance is $570,000Q: Are there any rate caps or equvalent "got chas" that I should be aware of?Q: Do I have any leverage to re-negotiate a better rate with my bank?Thanks for any help! I appreciate it. by garyre_836_408 from Salt Lake City, Utah. Feb 16th 2012 Reply


William J Acres (William_Acres)
#73 ranked lender in Arizona - 8,728 contributions

Ok.. so your home does not qualify for the HARP 2.0 program.. it's possible that the government will come up with another refinance plan (per Obama's speech 2 weeks ago), but that's not certain... and even if it is, it might not include Jumbo Loans.. if your loan readjusts, it will be at a lower rate, but how low will be determined by your original paperwork. Most adjustable loans have a "Basement" rate, or the rate will never go below x.xx%. (There is also a cap to how much it can go up as well) To calculate your new payment, us an amortizing calculator and use your "Original Loan Amount" and put in the new rate.. That will tell you what your principal and interest payment will be. Reading your original Note will answer most of your questions regarding How high/low your rate can go, and any "got chas"... If you're underwater on your mortgage, it's unlikely you will be able to refinance... you can go back to your current lender, but based on my past clients attempts, it's more than likely a waste of time.. You'll most likely have to "Ride out the Storm". WilliamAcres.com

Feb 16th 2012
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Will Whitaker (will@amlend.com)
#50 ranked lender in Utah - 6 contributions

Hi there. Look at the adjustment caps of your current loan. With 5-yr conventional ARM's, they are typically 5/2/5. The first 5 means that your very first adjustment can go up or down (from your start rate) a maximum of 5 %, so your math sounds accurate for calculating your new "fully-indexed" rate for year 6 of your loan. The "2" in the 5/2/5 means that, in subsequent annual adjustments, your new fully indexed rate in year 7, 8, etc. goes up or down a maximum of 2 % per year. The last "5" is the max adjustment your rate could ever be during the life of the loan (10.875 %--ugh!).As far as recalculating your new payment, the loan re-amortizes over the remaining years (i.e., a 25-year loan). So run your payment through a mortgage calculator at 3.3 % using a 25-year term. If the loan currently has an interest-only feature, then find out also when that feature goes away (probably after 10 years is my guess). So if even in year 6 you're at 3.3 %, your interest-only payment would be (3.3 % x loan balance / 12). Hope that helps. If you want more help with that math, shoot me an email: will@amlend.com.

Feb 16th 2012
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Christian Van Schyndel (Christ_926_609)
#52 ranked lender in Utah - 7 contributions

If I were you I would call my Lender and see about a loan modification. Worked for me. Good Luck!

Feb 16th 2012
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Linda Miller (Linda Miller)
#2 ranked lender in Utah - 572 contributions

As mentioned in the answer below, your interest rate will likely go down - you might have a couple of years before rates are back to 5.875%. Your loan may or may not revert to a regular principal and interest payment. You will need to review your NOTE to answer most of your questions. There were so many different types of ARM and interest only loans back then it is hard to say what your caps (both high and low) are and how often your loan will adjust without seeing the NOTE. I have an ARM (principal and interest) and it has gone down for the last three years - mine adjusts every six months. I know it will eventually start going up but I am hoping the value of the home will also go up as well to put me in a position to refinance at a stable rate. If when your loan resets you are still in an interest only loan you might want to start paying some each month on the principal.Please check out my blog on "Inventory of Utah Homes for Sale Decreasing" - http://lindamillergroup.com/category/real-estate/. As the inventory decreases we will start seeing home prices start to rise. Now this is happening in homes below $400,000 and it might take a while for your home to start appreciating again but the combination of you paying on the principal and rising values (even a little) will start moving you in the right direction equity-wise.I will be happy to look at your NOTE and see if I can help you read it and figure out what will happen when your loan resets. Contact me at 801.550.1222 or linda@lindamillergroup.com. All the best...

Feb 16th 2012
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Cory Ure (coryure)
#46 ranked lender in Utah - 50 contributions

All I'd add from what the others have said is check your loan NOTE to see if there is an interest rate floor. Some ARM's will not adjust down below the initial rate, as that is the "floor" rate. Most products I've seen based on the LIBOR index do not have a floor rate, however. I have a past client whose rate fell into the low 3's in January. He's decided to hold-out on refinancing for a year and through making the same monthly payment make some headway on his equity.

Feb 16th 2012
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Brett Pehrson (brettpehrson)
#19 ranked lender in Utah - 228 contributions

This is all good advice you've gotten so far. I might point out to you that the HARP 2.0 program also applies to Freddie Mac loans and not just Fannie Mae, but it's still not likely to help you if you are 30% underwater. You'll want to review your paperwork, or give me a call and I'll help you review it; I'm right here in Salt Lake City with you. You'll likely see the words "Floor Rate" in the ARM Rider or your Note. It will also talk about your interest only period; my guess is you're probably still going to be in your interest only period for up to 10 years, based on what I remember of these products in the summer of 2007, but it could be ending after your 5 year period also. When you're talking about caps of 5/2/5, which is the most likely scenario for a 5/1 ARM, keep in mind that the 2% cap is an adjustment cap and works both ways (up or down), so this scenario suggests you would not adjust below 3.875% this year assuming there is not a Floor Rate somewhere above that...otherwise, yes, it looks like your math with the Index + Margin is correct. Depending on your servicer, you may find it helpful to talk to them and see what they say about a refinance...be very careful when the word "modification" comes up. Yes, it's helped some people, but I've heard & seen more horror stories with modifications than I should have...modifying should truly be a last resort prior to a short sale or foreclosure. Hope that helps...I'm happy to help more if you want to email me at brett@homeloansinutah.com or call at 801-918-9385.

Feb 16th 2012
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Bert Carpenter (BertCarpenter)
#37 ranked lender in Arizona - 2,236 contributions

William's answer is spot on. You can try to negotiate with your bank, but they likely will tell you no. Even after making you jump through hoops. Also, some may advise you to miss a few payments before you try, I would advise against this. Your best bet may be to let your loan adjust. You can use the terms of the note to determine if there is a floor the rate will not go below, and use the current index and margin to determine the new rate. Keep making the same payment you were before the rate changes and specify the extra to go toward principal. Rates will probably remain fairly low for another year or two, maybe longer. During this time your principal will reduce and there may be another refi program like HARP for non-HARP loans that you can take advantage of. Good luck to you. ~ Bert Carpenter, The LoansA2z team of NOVA Home Loans ~ NMLS 40586 ~ www.LoansA2z.com

Feb 16th 2012
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Ralph Richard Guertin (ralph@absolutelowrates.com)
#136 ranked lender in Florida - 798 contributions

You just got some great advice from our panel, I would ride it out as you fuly indexed rate is likely to 3.3% unless there is a floor, which i haven,t seen many, usually HELOC,s impose a floor and judging from your margin of 2.25% you were put in a good spot at the time and rates will go up eventually but at a slower pace and you might have more options down the road

Feb 17th 2012
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