Financing in 94024>Question Details

Jeepie, Both Buyer and Seller in 94024

Refinancing ideas or alternatives for Jumbo 5/1 ARM?

Asked by Jeepie, 94024 Thu Feb 19, 2009

I have a jumbo 5/1 ARM @4.375%, which will reset in one year. I want to protect myself against a big increase if inflation takes off in the next couple of years. Refi rates for jumbo's seem quite high. Ideas?

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Jeepie,

In my opinion and in the short term, I would sit tight and watch the market. At 4.375%, you have a great rate for the next year. In March the conforming rate cap will go back up to $729,950 and it will take some time for rates to adjust to this cap (ie. as more and more lenders come back into the market at higher loan amounts, the lower these high end rates will be). If you need to make a change wait until about 6 months after the higher conforming rate comes into play, you'll likely get a more competitive rate.

I would also check with a good lender whose job it is to follow rates (and their indicators). If you need one, call Greg Vanslow at Princeton Capital at 650 948-0456. He has done a good job for me the last several years.
0 votes Thank Flag Link Fri Feb 20, 2009
If you contact an experienced mortgage broker you can still obtain a Jumbo 5/1, 7/1 or 30 year fixed in mid to low 5's. I would take advantage of the rates now and refinance. I would not take the chance and wait...
0 votes Thank Flag Link Thu Feb 19, 2009
Jeepie,

Take a look at my blog titled "Rules of Refinancing." I think your first and best analysis would be to look at what changes could occur on the 5/1 if and when it converts. Presumably you have a cap for your first adjustment, etc. So, I'd assign some dollar values to any likely change in terms. If you're a "glass half empty" kind of person, use the max rate. If you're more analytical, work with some statistical averages. I can help you with this research if necessary.

Second, I would look closely at what you might expect to pay on any new loan, versus what you are currently paying now and for the next 12 months. This difference in dollars is your "risk premium." By taking a new loan at a higher rate, you forego any savings that would come by sitting tight. However, if the refinance terms give you more peace of mind than your conversion estimates in paragraph one, you look at refinancing now and you bite the bullet and lose the savings. If, on the other hand, you look at the savings and they are not substantial enough to permit you to take the risk incurred by waiting, you can build your refinance case.

Let me know if I can offer any additional insight and I am happy to help if you'd like to work with a lender here in the Bay Area.

Thank you,

Rob Spinosa
rspinosa@mortgagemasterinc.com
0 votes Thank Flag Link Thu Feb 19, 2009
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