Which type of Mortgage to go for?

NEW -> Contingent Buyer Assistance Program
Shooby_IHB

Shooby_IHB

New member
So I'm getting ready to lock in my rate for my townhome at Camden Place. My credit score is great, above 740.



I'm deciding between a fixed 30 year rate or an adjustable rate. Seeing that the economy is terrible and the value of the dollar as bad as it is, I'm wondering if a fixed rate is the best way to go at this point.



I received a good faith estimate from my broker at UAMC for a 30 year fixed rate at 5.75%. Is it possible to go with an adjustable rate, and if/when the federal rate drops even further, switch to a fixed rate and lock that in? I'd hate to lock in a fixed rate at 5.75% or whatever and then find that a year later the rate drops below 5%, which I've heard is quite possible at this stage of the economy.



Thoughts/suggestions? Also, I'm living single, so I need to keep my mortgage around $2,100-$2,300 to maintain a somewhat normal style of living.



Thanks.
 
<p>Go with the fixed. While interest rates may go down, there is no guarantee you will be able to refi if they go up; your new appraisal might show you owe more than current value. Being stuck in an ARM in those circumstances would suck. For me, I prefer the security of knowing my payment will always be the same.</p>

<p>Mortgage rates below 5%? Not bloody likely.</p>
 
Fixed is always better. It gives you control of your interest rate. If rates were to drop, you can refinance. If rates go up, you are protected. The slightly lower interest rate you receive on an adjustable rate is hardly compensation for the risk you are taking on.
 
Thanks guys...the only way it'll be worth it for me is if the interest rate falls to 4.75% for me to refi right?



What kind of person would use an ARM anyway?
 
<p>I modified my loan from a 15% to an ARM in the mid 80s. It dropped steadily to about 8%, without the necessity of refinancing. It was a special case. I represented the S&L and it was in the nature of an employee benefit. It originally had an 18 year term, (chosen by me), and when we sent to sell, we only owed 30 grand or so.</p>

<p>So an ARM was an excellent choice in that circumstance.</p>

<p>It all depends on your circumstances. As to our present circumstance, chose the fixed. As to the mid 80s to mid 90s----them days are gone forever, forever being defined as at least 10-15 years from now.</p>

<p>(It could happen that we could again have a severe inflation, with a huge run up in rates, followed by a drop in rates, but with a 15 your loan will be paid off or nearly so before that scenario would play out.)</p>

<p>It seems weird, but it may be that we will have a housing deflation with a severe inflation for everything else?</p>

<p>Or, will we start feeling so poor, we don't want to buy anything? Somehow I doubt that Americans will suddenly turn frugal? </p>
 
Go for the 15 year fixed. There is no guarantee that adjustable mortgage interest rates will decrease as Bernanke lowers the fed funds rate. The Ted spread, LIBOR to 10 year, is increasing even though and maybe as a result of Bernanke devaluing the dollar. Most adjustable are based on LIBOR.
 
"What kind of person would use an ARM anyway?"



Someone like me. I just closed on my VOC house. I'm going with a 5/5 arm because I'll be moving in 5-10 years. A 30 year fixed is 6.875%. The 5/5 arm is 5.5%. Worst case scenario on my arm is 5.5% for 5 years and 7.5% for 5 years. I come out ahead no matter what if I move within 10 years.



I have to agree with others here. Fed cutting rates does not necessarily mean mortgage rates will drop.
 
Nude is right. The main problem is appraisel. If it drops in value the rules of refi change. I find this to be a big problem.
 
Shooby,





If you can afford a 15-year fixed rate loan, go for it, and pay off the loan. You'll thank yourself for it in 15 years when you own the property free and clear.





Not having a mortgage over your head will give you a lot of financial freedom.
 
<i>"If it drops in value the rules of refi change. I find this to be a big problem."</i><p>


Nah, the knife catchers are too smart. This will not happen to them. They have figured out everything.
 
<p>If a 15 year PITI payment is EASILY affordable, then do the 15 year fixed. If you feel that you are stretching it, than go with the good 'ole 30 year fixed. You can always pay more at your leisure. The 30 year will be at a higher rate though, but probably only a 1/4 percent.</p>

<p>As far as waiting goes....DO NOT WAIT. The 10 year note just broke below 4.0% but rates are very sticky right now. Banks can't afford to continue to drop rates because they are not selling many of their loans. Before Investors who purchased loan packages would set their price based on the bond markets, but banks are starting to lend their own money now, which means risk plays a much bigger factor. The GSE's are already feeling the pain. They need to increase profitabilty for the shareholders, while at the same time feeling pressure from gov't regulators to keep mortgages available.</p>

<p>The declining appraised value issue is HUGE. Refi now before values plummet even more.</p>
 
So basically lock in my rate for 15 yr fixed asap. I would if my damn mortgage broker would even contact me...UAMC is terrible.
 
rates are not going to go up anytime soon, certainly not before x-mas.



get a 30year but pay principal to pay off in 15years. if something goes wrong you have the saftey of a lower payment with almost the same interest rate, or use points to get the same rate.
 
<p>Just call or walk into a Wells Fargo, Union Bank, or Indymac branch. You should be able to close it in less than 14 days. Why are you going through broker for a conforming product? It sounds like your loan doesn't need any "polishing" before it goes to underwriting. </p>
 
Indymac is still lending. I have a transaction scheduled to close this wee with them. First regular financed residential transaction in my ofc since early August.
 
I had an incentive of $6K towards closing costs if i went through there broker, hence the reason I haven't been searchign on my own.
 
If a builder was willing to give me an "incentive" of $6,000, I think my first question would be; What is this $6,000 going to cost me?
 
you have to do your homework. no matter what broker. UAMC is right in line with their interest rates with the open market. they don't screw u over for using their lender. but don't expect much advise from them either.

in this case they are helping you by not responding fast... most likley you will see a 1/4 point decline in mid dec. if you can wait till then to lock your interest, wait. my humble opinion.

and if you really want to lock right now. contact the mortage broker. phone, e-mail whatever. i only use e-mail. great. all in right and fast.



good luck
 
You must log in or register to reply here.
Back
Top