I currently have a home and my mortgage is with Citimortgage and I have a Fixed interest rate of 6.5%. I

Asked by Delaney, Colerain, OH Fri May 9, 2008

applied for refinancing with my credit union. They are offering me a 3-1 ARM at 4.49% or a 6% for Fixed rate.
What should I do? Should I take the ARM and put away some money now. My current mortgage is $804.50, but with PMI, and escrow it is $1071.90. It is increasing b/cuz of escrow to $1,099.77 nxt month.

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18
Kim Boyd, , Clermont County, OH
Fri Aug 1, 2008
Go with a fixed rate !! Go with a fixed rate !!

I can't say it enough.

So many people get in trouble with an ARM.


"Fill your Real Estate Void with Scott and Kim Boyd"
0 votes
Sheri Mapes, Agent, Mason, OH
Thu Jun 26, 2008
Fixed rate for sure! The rates are going up slightly.
0 votes
Delaney, , Colerain, OH
Thu May 22, 2008
Thanks for everyone who replied. Your comments and expertise are very much appreciated!
0 votes
Myke, Home Buyer, 89449
Wed May 21, 2008
let me ask you a question.

How comfortable would you be if in 3 years - your payment is say $1700? How's about $2000?
All of the sudden that $1099 ain't so bad huh?

Adjustable rates are best left to people who can manage the additional baggage that comes along with that. You have to remember that the bank is throwing you that teaser rate of 4.49% to get you in the door. The house always wins - and the bank WILL make that money back when your loan resets in 3 years.

Go for the stability of the fixed rate, even if it is a bit higher. The PMI stinks - but it gets removed once you hit 22%(?) equity in your home. A couple extra bucks here and there towords principle in between mortgage payments goes a long way towords getting there.
In the long run, it's a much safer, much wiser bet if you plan on staying in your home for any length of time.
0 votes
Debt Free Da…, , 85260
Wed May 21, 2008
If you plan on being in the home for a long time do not do the arm. Who knows what rates will be like in a few years with a current state of the world.
Web Reference:  http://GetPrequalified.com
0 votes
Timothy Osbo…, Agent, Florence, KY
Wed May 21, 2008
Do not refinance! I am a seasoned Real Estate and Mortgage Broker in KY/OH/IN. Adjustable rate mortgages are good in situations where borrowers can control their risks and understand the consequences of their decision should market conditions change. What happens if you cant refinance in a few years when it adjusts? Many borrowers today are being foreclosed on because of their ARM's adjusting and they can't refinance. You are in a fixed rate mortgage and you have built equity in your home. Why would you want to loose your equity and risk your stability? Other options to consider are personal installment loans, short-term promissory loans at your local bank and/or a line-of-credit if your situation warrants a loan, but only utilize the ARM as your last resort. Don't risk your equity or potentially being in a future situation of loosing your home. JUST NOT WORTH IT!
0 votes
Delaney, , Colerain, OH
Wed May 14, 2008
I have been in the home since 2004 had an ARM and refinanced in 06 to my current rate.
The closing costs for the loan are $995.00. Im not sure that .5% is worth refinancing.
0 votes
Rainey Delot…, , Cincinnati, OH
Sat May 10, 2008
Delaney -
How long have you owned the home? Any chance that you've owned it long enough to have 20% equity in it so you can request to drop the PMI?
In regard to your dilemma about refinancing, I always tell my clients that if you can handle the payments of a fixed rate 30 or 15 year loan, do it! A lot of people say that they will only be in a home 3 or 5 years but, truth be told, none of us can predict the future. One has no idea what their life situation will be 3 or 5 years down the road and, at that time, may find they can't afford to make a move but might not also be able to stay in the home if their rate begins to adjust every year. For example, some people who bought in 2004 or 2005, at the height of the market, and got a 3 year adjustable may not be able to move now because they can't get what they paid for their home 3 or 4 years ago. They are in a situation where they will have to handle the adjustments made to their rate until the market recovers enough for them to be able to sell and recoup what they paid. My advice, personally, would be to stay with the 6.5% fixed as long as you can make those payments. If you have a good credit score, there's no reason, however, not to shop some lenders and try to better that 6% rate to something in the high 5's. Also, be sure to figure out what the closing costs are on the loan and how long it would take you to make that up based on what you are saving on the interest rate.
Good luck!
0 votes
Concetta, , New York, NY
Fri May 9, 2008
You mentioned you willonly be in your home for 3 to 4 yrs more years, So I say stay put and don't do any thing that will cost you money right now.
0 votes
Dan Weis, Agent, Cincinnati, OH
Fri May 9, 2008
Hi Delaney,

Do you have to pay closing costs at 6%? I would check out a couple of lenders, like I mentioned earlier. I have a client, who went to a credit union, but when they talked with another lender, they got a better rate.
You just need to compare and make sure it's apples to apples. Good luck!
0 votes
Delaney, , Colerain, OH
Fri May 9, 2008
thanks a bunch. . . .
So is it worth refinancing for the fixed at 6% if I currently have a 6.5%?
0 votes
Mary Anzalone, , Raymond, NH
Fri May 9, 2008
yes Delany, there are many other questions to be asked. How long it will take you to recoup the cost of the loan vs savings on monthly payments. You mentioned you have PMI, I don't know what your loan to value is right now, but this also needs to be considered. What will the return on your investment be in 3 years? I would also suggest that you look at longer term arm rates. 5/1 & 7/1 this will allow you a bit more time at a fixed rate of interest just in case you can't or don't choose to sell in 3 yrs. Sit down with your mortgage person at the credit union. If they don't ask lots of questions and explain options to you then move on to someone else.
0 votes
Delaney, , Colerain, OH
Fri May 9, 2008
I was told that credit unions offer the best rate for auto and home loans . . .grrrr!
Thanks Carol
0 votes
Carol Meadows, Agent, Cincinnati, OH
Fri May 9, 2008
Hi Delaney,
If you don't plan on staying more than 3 years, you will be safe with a 3-1arm. What if you decide to stay longer, you will have to refinance again. The worrying thing about refinancing is of course that the rate may be much much higher than it would be today but also the value of your home may be significantly less than it is today and therefore preclude you being able to refinance at all.
I always advise that you take the safe route. Risk may cost you. It is up to you!
Credit Unions also may not be the best place to find the lowest interest rate. Try a broker for comparison. I like Jim Humphries Mortgage, tell them I sent you! Carol Meadows
0 votes
Delaney, , Colerain, OH
Fri May 9, 2008
I dont plan on staying longer than 3 - 4 years.
0 votes
Dan Weis, Agent, Cincinnati, OH
Fri May 9, 2008
Hi Delany,

There are more questions that need to be asked than what you have here. What are the closing costs involved with these loans? Are these rates with a "no closing costs option", where the lender pays your closing costs with a slightly higher rate?

These are really questions a mortgage consultant should answer; not Realtors. With all of the changes happening in the mortgage industry, you've got to be careful that you aren't be scammed or put into a bad loan. I personally would NOT get an adjustable rate mortgage right now, unless you're one of a very small group of consumers who would benefit by it. Again, only an experience mortgage consultant can help you with that question.

What happens if some months you can't put the difference in payment away or what happens when your interest rate adjusts annually after the first 3-year period? Are you going to be able to cover the interest rate increase? You have to understand that most years you're payment will go up, because property taxes and your homeowner's insurance will increase.

I've worked with Rick Pilger of Union National Mortgage for over 5 years and my clients love him. He's taught home buyer classes with me for years. Rick takes a financial planning approach to helping you determine which type of mortgage is in your best interest. After talking with you and reviewing your credit information, he may tell you it's better not to do anything at this moment. That's the type of person you want to talk with. Rick's number is 513-234-4987 or cell: 513-600-9003.

I hope this helps you.

Take care,

Dan Weis
Real Estate Consultant since 1985
RE/MAX Unlimited Realtors
cell: 513-615-1890
dan@danweis.com
0 votes
Kevin Duffy, Agent, Cincinnati, OH
Fri May 9, 2008
All depends on how long you are going to stay. If you are going to stay long term. The fixed is best. If you are only going to be there 3 years, take the ARM. Be carful of a pre payment penalty!
Web Reference:  http://www.kevinduffy.com
0 votes
Mary Anzalone, , Raymond, NH
Fri May 9, 2008
my first question to you - how long do you intend on staying in this property? realisticly.
0 votes
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