Refinance Arm into 30 year fix closing costs ?

I have a 5/1 ARM that will reset in July '10 and originally borrowed $180K with a rate of 4.91%. My property is now valued at $209K and I have $30,000 in equity. My loan balance is $170K and I'm willing to bring some cash to the table to avoid MI. I was offered to refinance into a 30 year fix at 4.8% with closing costs of $4400. The difference in monthly payments is around $52. I do plan on staying there or renting it out for at least 5-10 years. Should I take this offer or wait a few weeks and see if interest rates dip a little more?

Update:

it has been my primary residence for the past 3 years and present. The location is both strong for jobs and rental.

3 Answers

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  • 1 decade ago
    Best Answer

    Take it. Rates are not going to get lower

  • 1 decade ago

    If it cost $4400 to do the refi ad you net a savings of $52 a month; it will take 7 years just to recover your cost of the transaction and almost 8 years to get a 10% Rate of Return on the investment. Not what I would call great Numbers but you also are reducing your risk of the ARM adjusting so IF you are planning on keep this as a rental if MAY make sense, but there are a few OTHER factors you need to consider.

    If you live in the home for 2 out of the last 5 years, you can sell ad take up to $250,000 TAX FREE gain if single, $500,000 if married. You lose part of this under Obama's current plan if you rent it out.

    Second is what are rental rates for the house and what is the cash flow? What is the population and job growth in your neighborhood? IF this house is in Detroit where jobs AND population are dropping that is a COMPLETELY different picture then if the house is in a city GROWING jobs and people. Third factor is tax's of the property, the state, and how you how your income/property structured. Is this titled in your personal name? Great for taking the tax free gain but VERY risky if turned into a rental.

    Based on information provided I can't tell you what fits best for you.

    Source(s): Real estate investor
  • 1 decade ago

    jump on it now. rates have gone up today 2 times.

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