Refinance now or wait?

Asked by John, Cary, NC Fri Feb 6, 2009

I have a 5 year ARM that will adjust for the first time next month from 4.5% to 3.25%. The rate, which will continue to adjust every 12 months, is based on the index value of the weekly average yield on one year US Treasury Securities plus a margin of 2.75%. According to my loan documents, the rate increase is capped at 2% each year it adjusts.

My question: I plan on keeping this house for several more years and therefore would like to take advantage of the low 30 year fixed rates being offered. I noticed they have begun to climb over the past few weeks, and I'm wondering about the chances of them falling under 5% again. I would like to take advantage of my new low rate for as long as I can, but I don't want to miss the best window for locking in for the long term. I'm curious what people's thoughts are for what rates will do in the coming months?


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Jennifer Don…, Agent, cary, NC
Fri Feb 6, 2009

Great question, I forwarded it to our mortgage specialists. Here is their response. I hope it helps!


Hope you are well. This is a good question!! I am assuming that the 4.5% is going to 5.25%. Is that correct? The best way to evaluate your mortgage refinance situation is to put you on a rate watch. We can do a quick over the phone mortgage application and work the numbers based on current quotes. We will then have your base information and start your rate watch program. After working the numbers, you can decide at what point it makes sense to refinance based on new payment and the number of months it takes to recoup your closing costs fees. Beware of companies that state “no closing costs.” They may not charge them up front, but build them in on the back which will affect your payment for 30 years.

Also, we can run some numbers on your current home to see where values are. It would be great if you had enough equity to drop your PMI payments. Do you currently have PMI on your mortgage?

Take care and talk to you soon,

Greg and Claudette Anderson
Alera Financial
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Wendy Norman, , Raleigh, NC
Fri Feb 6, 2009
I spoke with a lender contact of mine regarding your question. He suggested keeping the loan... but also to keep your target rate in mind if you want to refinance in the future. If you'd like him to follow up with an email or phone call, feel free to send me your contact information (he's a Certified Mortgage Planning Specialist with Blackstone Mortgage). There's really no way to predict what interest rates will do as they can change multiple times daily and if the Fed decreases interest rates, it doesn't always have the same effect on mortgage lending rates (sometimes they increase). Rates are still hovering around 5%, but there's no guarantee that they'll go down's still all speculation at this point. If you're planning on staying, it could be worth the gamble to keep the lower rate and re-evaluate later...but mortgages aren't my area of expertise, so you'd definitely want to check with someone with specialized experience in that field. Thanks for the question and have a wonderful weekend! Wendy
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