Forgotten Your Password?

Need to Register?

Question Icon

Should I break my 7/1 ARM

I have an ARM mortgage which I got in 2012. I have 7 years ARM @ 3.875% 30 years fixed. My loan amount is $250,000. I am planning to stay in the house for next 5 years. I am in CALIFORNIA. Thanks or your advice. by emailnikul744 from Oakland, California. Jan 14th 2016 Reply


Dan Paladin (dpaladin)
#1 ranked lender in California - 589 contributions

I should be able to get you a lower rate though I would need more info....Feel free to contact me. 562.254.5616

Jan 14th 2016
1
0
Blake Kleckner (BlakeK)
#388 ranked lender in California - 258 contributions

Refinancing now depends on a few factors. If you keep your 7-year ARM, the interest rate (IR) will adjust in 2017. It could adjust up, or it could adjust down. That is determined by adding the financial index, most likely 12-month LIBOR, to the margin the lender set at the time of the loan's inception, which can be 2% or higher. You can find your loan's margin, normally, on the 2nd page of the note. Without knowing this, it is impossible to determine the IR you can expect. Also, LIBOR changes daily so there's no telling where it will be in 2 years. In addition, when your loan adjusts, the time left on it will be 23 years, so your new payment will be calculated for that number of years, not the original 30. Furthermore, if your ARM is a typical one, the IR will adjust every year thereafter, subjecting you to, possibly, ever increasing IRs and monthly payments. In 2012, LIBOR ranged from 1.13% at the beginning of the year to .843% at the end. Assuming that it was around 1% when your loan was originated, that would mean it's margin is 2.875% (your 3.875% IR minus 1% for LIBOR). For the sake of example, let's say LIBOR will be 1.5% in 2017 (currently it is on the rise), that would mean your new IR would be 4.375% (3.875% + 1.5%). Based upon your $250,000 current loan balance, and assuming that you have only made the regular payments since your loan began, I estimate that it was $277,000 at the beginning, and the P&I payment is around $1,300/mo. In another 2 years, the balance should be close to $238,000. If the IR is 4.375% then, that would mean your new monthly ARM payment would be $1,369 for the 8th year, and change every year after that. Of course, these numbers are all based on assumptions, so they may not be completely accurate. If you refinance into a new 30-year fixed rate loan now, and I believe it's possible to do at 3.875% with a no cost, or very low cost, loan; using a $238,000 loan amount, your monthly payment would be $1,188/mo., saving you $112/mo. compared to keeping the ARM loan for the next 2 years, and at least $181/mo. after your loan adjusts. Assuming you stay in your home for the next 5 years, that means you would save about $9,200 during that time period. If you stay in it longer, you'll save even more. All of these estimates are predicated on your ability to qualify for the new loan, and at what level. The most important factors are your FICO score, home's loan-to-value ratio, monthly gross income, and monthly debt reported on your credit report. Without this information, and some other pertinent data, providing you with an accurate analysis of your circumstance cannot be done. Give me a call 16/7, or email me your phone number so I can call you, and I'll be happy to discuss your situation with you. To learn more about me and our mortgage brokerage, click on my picture. When the next page pops up, click on "Website" and you will be redirected to ours. If you get a chance, read some of my blogposts on Lender411. They are quite informative. We work exclusively in CA and get loans done fast, usually in less than 30 days, at low interest rates and costs. I started doing mortgage loans in CA in 2006, and only do them there so I have an exceptional understanding of this extraordinary market. Representing more than 50 quality lenders that offer in excess of 1,000 loan programs, we definitely have something for everybody.

Jan 14th 2016
1
0
William J Acres (William_Acres)
#73 ranked lender in Arizona - 8,726 contributions

From what your saying, I would say you should look into a 5/1 ARM.. the rate would be close to what you have now, possibly the same or lower, and it will be fixed for the next 5 years.. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. William J. Acres, Lender411's number ONE lender in Arizona. 480-287-5714 WilliamAcres.com NMLS# 226347

Jan 14th 2016
1
0
Allen Moshiri (massimoallen@gmail.com)
#1071 ranked lender in California - 3 contributions

Greetings,Based on what you have stated, you have about 3-4 years into this loan. You did not mention the rest of your ARM loan terms. Do you know what happens when your reach the seven year maturity and the end of the (7) year fixed term? Your loan will definitely start adjusting based on a predefined rate and duration which was disclosed to you in your loan documents. The question really is will the rates be in the 3.875% range 3 years from now! The real answer is that no one knows! Needless to say currently they are still in the low 4% range, I personally think that if you were to refinance into a fixed term loan, you would be better off than taking a big chance with the rates 3 years from now. You may find yourself in a tough place where you could not afford to refinance, this is worth a definite consideration.I am licensed and do business in the entire state of California, I would be more than happy to discuss this with you further. You may reach me at 310-699-7957 and or massimoallen@gmail.comBest of Luck.Allen Moshiri NMLS# 1083889

Jan 14th 2016
0
0
Larry Gray (lgray_312_247)
#594 ranked lender in California - 1,139 contributions

In looking at the 5/1 right now...a no points loan which still may cost $3000...if you saved $115 a month it would take 26 months to recoup the costs and perhaps you still save $4104. Is that worth it? Obviously, if rates are not low enough to make it worth your while you should have a mortgage broker/banker on rate watch should the ARMs get low enough to make it worth your while. Rates for a 7/1 dipped down in the 2s while you had the loan...my goodness your original loan officer or someone must not have been calling you to take advantage!

Jan 14th 2016
0
0
Subscribe to our news feed.