gregorygarver.com

DS · Joined: 13 Feb 2007 Posts: 5

I am a first time homeowner and my primary homeloan is an Interest-Only 5/6 LIBOR ARM. It was explained to meby both my real estate agent and the mortgage guy as a wise thing to do given that the Atlanta housing marketis 'always strong' and if you think you 'might move within 5-7 years'. There was (and still is) a chance I mayneed to move within that timeframe and it's true Atlanta has been a hot market for quite some time(until now). So I decided to go with it eventhough I wasn't quite comfortable with the idea, but I wrote that off to first time home buying jitters and trusted the 'experts' I had.So, I am wondering if you have this type of loan, what is the best way to protect yourself? Should I refinance to a 30 or 15 yr fixed rate? And if so, is it a situation of the sooner, the better or should I hang on until I near the end of the 5 year period? I am 2 years into my 5/6, so I have time before it begins its potential jump. My job is stable.

BenV · Joined: 23 Feb 2007 Posts: 4

I would probably refinance into the 30 year fixed mortgage at this point. You'll be making a higher payment than you do now, and if you can afford that, it will likely be your best bet.It also depends on how much you put down as your downpayment when you purchased the home. If you have a loan to value of 80%+, you'll have a very tough time refinancing into something you'll really like. Even with strong credit. It's not impossible, but the market has shifted.The rates have the potential to do anything right now. They have been up and down in the last 2 weeks - through all the volitility. The Fed is expected to cut the reserve rate and that will have an immediate effect on some loans (HELOCs specifically) and a delayed effect on the rest of the market. However, if there are fewer investors that are providing funds to lenders, then rates will go higher from sheer supply and demand.I would probably refinance so that you can have peace of mind.Best of luck.

open4one · Joined: 05 Mar 2007 Posts: 5

Most of the time, those loans have a Prepayment Penalty that's really ugly. Read your Note, and any addendums to the Note. I would expect it to be three years. You also said "primary homeloan". Usually second mortgages are at higher rates, and you can't refinance a First without either refinancing the Second, or at least talking them into a Subordination to the new First. Think about any second mortgages first. As far as the Atlanta market being "strong".... all markets are strong right before they get weak. Interest only is fine if you're planning on holding short-term, or if the market goes up or at least stays flat. There's another direction it can go, though.

DianaD · Joined: 15 Mar 2007 Posts: 4

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Mike6957 · Joined: 26 Mar 2007 Posts: 4

You should have refinanced yesterday.Rates could continue to climb, your house value can continue to go down... and you might not be able to get a refi in a few months... forget about a few years.You need something stable... things in your life could change where having this loan hanging over your head could really hurt you financially.Dont forget, home interest rates have been 17+% before (not too long ago) and if they go there again, then what do you do?(I dont think they will ever go that high again, but no one knows... and at least for now, home prices are falling)You should get a 15 year fixed if you can afford it... otherwise go 30.