Anonymous
Anonymous asked in Business & FinanceRenting & Real Estate · 1 decade ago

refinancing from a 5 year arm to a 30 year fixed rate?

currently i have a 5 year arm - it is set to adjust in about 2.5 years. i believe i have a 6-6.25% interest rate. i wish i would have got into a 30 year fixed in the beginning. question is, should i re-fi now or wait until my 5 years are up?

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  • 1 decade ago
    Best Answer

    Everyone is so scared of arms, probably because they are not educated on the pros and cons of them. You have a rate for the next 2.5 years that will be 6-6.25, that's not that bad, you would have a difficult time of getting that now, depending on your credit, income, etc. The issue your going to have is what kind of equity do you have in the home. When you got the arm, was it a purchase or a refi? Where are you located? Has your property been devalued like so many across the country? If you don't have the equity, unless you can put money down, you cannot refi anyways. Another question to ask is are you planning to stay in this home after the 2.5 years are up. If not, they why would you refi and pay principle on something you don't plan on staying in? If you are, then yes, you need to consider a refinance. Another issue is since you have the arm, you have not paid principle, thus your either going to have to add, 3-5k to the loan amount to refi or pay out of pocket for closing costs (depending on your loan amount, this could be high or low). Being a mortgage broker, I'd love to tell you to refi, but you cannot answer this question for yourself until you know what your home appraises for and how long your going to stay in the home. Look at all the facts and make a determination. If you don't have enough equity in the home to refi, start socking money away so that when you do refi, you have some money to put down. If you do have the equity, I do have to say yes, refi as rates are going to move higher. If you have 350-450, call a local appraiser in your area and have a full appraisal done, it will be needed if you refi anyways. this way you will know exactly where you stand and if you have equity to refi. If you don't have any equity, don't panic. You have 2.5 years of a decent rate, you have time to start preparations to refi or who knows, maybe you want to downsize, or hopefully the market turns upward in 2 years and you can make a better financial decision. If you have equity, go the FHA route, they are more forgiving with credit and you dont need as much equity. good luck

    Source(s): 7 years title examiner, mortgage broker
  • 1 decade ago

    well i was in a similar situation but i had a 2yr fixed rate and i did it since they are expecting rates to be very hi in the next few months and not to drop for several years. if it were me i would so you don't get stuck with a bad rate. the guy i used was great unlike most company's he explained everything to me and he said they don't even do adjustable mortgages her is his email if you want to talk to him to see what he thinks chris.schott@usahomeloans.net

  • 1 decade ago

    fixed rate

  • 1 decade ago

    Refinance now

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  • 1 decade ago

    Do not wait.

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