How low can we go? 30 yr fixed at 3.75% with no fees...

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Irvine Dream said:
OHills said:
Are there any disadvantages to a 7/1 or 5/1 ARM besides an unexpected spike in interest rates?
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Refinancing an existing 7/1 or 5/1 ARM just pushes the time down the road when the payment terms adjust.  So if you are near the tail end of an existing ARM then it is worth, otherwise it is likely that the small adjustment in rate would do much to offset the closing cost or the headache you are going to have by the lenders requests of billions of documents.
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One big advantage is paying down the principal faster. Only after a few years of being in a 5/1 I can switch to a higher rate 30-year fixed but my payment will go down.

#armmiracle
 
irvinehomeowner said:
Irvine Dream said:
OHills said:
Are there any disadvantages to a 7/1 or 5/1 ARM besides an unexpected spike in interest rates?
Click to expand...
Refinancing an existing 7/1 or 5/1 ARM just pushes the time down the road when the payment terms adjust.  So if you are near the tail end of an existing ARM then it is worth, otherwise it is likely that the small adjustment in rate would do much to offset the closing cost or the headache you are going to have by the lenders requests of billions of documents.
Click to expand...
One big advantage is paying down the principal faster. Only after a few years of being in a 5/1 I can switch to a higher rate 30-year fixed but my payment will go down.

#armmiracle
Click to expand...

So any major disadvantages of doing 7/1 or 5/1? Why doesn't everyone do it compared to 15 or 30 year fixed?
 
Because it involves more risk. If your financial situation were to change for the worse right when the rates start adjusting, you'll be in a bad place.
 
B2FiNiTY said:
Because it involves more risk. If your financial situation were to change for the worse right when the rates start adjusting, you'll be in a bad place.
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Basically your hedging that rates will stay low.
 
If you're young and you think your earning potential is high, that also insures against rising rates.

You can always serial refinance into the lowest rate 5/1 or 7/1 until you can get the balance low enough where you can do a 15-year which should always be lower than 30-year but that is also a bet.

The other thing is if you are young, more likely than not you will move up in 5 or 7 years so you will not even have to worry about a rate jump..
 
Just look at the possible max rate/payment in a 5/1 ARM WTSHTF, can you sustain that?  If you can't, what's your escape plan:  pay it off, sell the house, squat, etc.

Time to preach the 5/1 ARM again....
 
irvinehomeowner said:
If you're young and you think your earning potential is high, that also insures against rising rates.

You can always serial refinance into the lowest rate 5/1 or 7/1 until you can get the balance low enough where you can do a 15-year which should always be lower than 30-year but that is also a bet.

The other thing is if you are young, more likely than not you will move up in 5 or 7 years so you will not even have to worry about a rate jump..
Click to expand...

This is interesting...maybe we'll look into this. We're always done a 15 or 30yr fixed but can sustain a high payment if we had to if interest rates shot up. It's likely that won't happen so suddenly. I'm sure rates will rise but slow and gradual over the years. We plan to stay in this home for at least 10 years, possibly 12. But paying down the principal quicker is very tempting.
 
Paris said:
irvinehomeowner said:
If you're young and you think your earning potential is high, that also insures against rising rates.

You can always serial refinance into the lowest rate 5/1 or 7/1 until you can get the balance low enough where you can do a 15-year which should always be lower than 30-year but that is also a bet.

The other thing is if you are young, more likely than not you will move up in 5 or 7 years so you will not even have to worry about a rate jump..
Click to expand...

This is interesting...maybe we'll look into this. We're always done a 15 or 30yr fixed but can sustain a high payment if we had to if interest rates shot up. It's likely that won't happen so suddenly. I'm sure rates will rise but slow and gradual over the years. We plan to stay in this home for at least 10 years, possibly 12. But paying down the principal quicker is very tempting.
Click to expand...

check out the economist
 
Paris - based on everything you have stated about your financial situation you seem to be perfect candidates for a 5/1 or 7/1 arm. You are probably paying at least half of a percentage higher right now if not more with a 30 year. I used to be a non believer and fan of the 30 year (set it and forget it) but these guys convinced me.
 
irvinehomeowner said:
eyephone said:
If you go the arm route, if you rent it out and plan to refi consider the interest rate you will get for the rental
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For our rental we got a non-jumbo 30-year refinance <50% LTV for 3.625.
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Good to hear. Hopefully the rental is cash flow positive?
 
qwerty said:
zubs said:
How much did you save because you did a 5/1 instead of 30?
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Savings was about 500/month gross, about 300/month after taxes. Went from a 30 year 3.75 to a 5/1 2.75
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Besides the lower monthly payments,  5/1 ARM also build up more equity than a 30 year fixed loan.  When the time comes for your next refi, your loan amount will shrink more if you currently has 5/1 instead of 30 year fixed. 



 
lnc said:
qwerty said:
zubs said:
How much did you save because you did a 5/1 instead of 30?
Click to expand...

Savings was about 500/month gross, about 300/month after taxes. Went from a 30 year 3.75 to a 5/1 2.75
Click to expand...

Besides the lower monthly payments,  5/1 ARM also build up more equity than a 30 year fixed loan.  When the time comes for your next refi, your loan amount will shrink more if you currently has 5/1 instead of 30 year fixed.
Click to expand...

You are hoping that rates don't increase when the time comes.

I have to say rates have been low, but if it may creep up.

 
eyephone said:
lnc said:
qwerty said:
zubs said:
How much did you save because you did a 5/1 instead of 30?
Click to expand...

Savings was about 500/month gross, about 300/month after taxes. Went from a 30 year 3.75 to a 5/1 2.75
Click to expand...

Besides the lower monthly payments,  5/1 ARM also build up more equity than a 30 year fixed loan.  When the time comes for your next refi, your loan amount will shrink more if you currently has 5/1 instead of 30 year fixed.
Click to expand...

You are hoping that rates don't increase when the time comes.

I have to say rates have been low, but if it may creep up.
Click to expand...

rates arent going anywhere. 3 to 4.5% 30 year mortgage rates are here to stay. virtually every home owner probably holds a sub 4.0% mortgage. If rates go up to fast too soon the whole housing market will implode. this will allow ARM owners to get out (refi) relatively unscathed.
 
qwerty said:
eyephone said:
lnc said:
qwerty said:
zubs said:
How much did you save because you did a 5/1 instead of 30?
Click to expand...

Savings was about 500/month gross, about 300/month after taxes. Went from a 30 year 3.75 to a 5/1 2.75
Click to expand...

Besides the lower monthly payments,  5/1 ARM also build up more equity than a 30 year fixed loan.  When the time comes for your next refi, your loan amount will shrink more if you currently has 5/1 instead of 30 year fixed.
Click to expand...

You are hoping that rates don't increase when the time comes.

I have to say rates have been low, but if it may creep up.
Click to expand...

rates arent going anywhere. 3 to 4.5% 30 year mortgage rates are here to stay. virtually every home owner probably holds a sub 4.0% mortgage. If rates go up to fast too soon the whole housing market will implode. this will allow ARM owners to get out (refi) relatively unscathed.
Click to expand...
http://www.cnbc.com/2016/08/12/fed-...-donald-trump-prevails-says-citis-buiter.html
 
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