gregorygarver.com

[MichaelZ]

I bought a house last May. My mortgage is fixed for 5 years @7.50%. Should I refinance for a better rate now?

[BruceJ]

Go for a fixed rate unless you are absolutely certain you will move in just 5 years.

[NEOPIRATE4509]

Get a standard 30 year fixed rate mortgage. If you can't afford the payments then guess what you can't afford the house. Even if you are certain that you will move in 5 years or less, something could change that.

[smiling_freds_biz_info]

That depends upon your situation.Do you have a prepayment penalty on your current loan?Has your credit score dramatically improved?Have you put improvements that add significant value into the property?Have you (or will you) paid down the debt in a significant way?Has your income increased significantly?Loan rates have decreased slightly. But it's unlikely to be enough to make it worth refinancing in most cases like yours, unless there's something about your situation that is significantly better (from a lender's point of view) than it was in May.There's nothing wrong with a 5 year fixed hybrid ARM. Those are the loans I usually do for my own residence, although of late there hasn't been much difference between that and a thirty year fixed. But they usually have lower rate/cost tradeoffs, and most people don't keep their loans for five years, anyway. Right now, the difference between a 5/1 ARM and a 30 fixed is still only a quarter to three eighths of a percent for the same cost, but it's usually at least a full percent. If it makes you psychologically uncomfortable, that's one thing. But economically, a 5/1 makes a lot of sense. Furthermore, your costs for the 5/1 are sunk at this point in time, and you don't get them back if you refinance, while if you do refinance, you'll pay another entire set of loan costs (minimum of about $3000, plus whatever points you pay to buy the rate down)I love doing loans for folks, but with the information provided, I can't see a likely benefit for you in refinancing.

[pOrkrOd]

It really depends on a number of factors. Are there any penalties for getting out of your current mortgage early? What are the setup costs on the new mortgage? Sometimes although you may be on a higher rate now, after figuring out all the costs associated with swtiching to a lower rate, it's actually more expensive to move to the lower rate!

[Golden]

The rate of 7.5% seems very high. I recently refinanced my house at 5,25% for a 15 year fixed.I recommend that you only talk to your credit union if you are a member of one, or the bank where you have your checking and savings accounts.Do not talk to Mortgage Brokers whether online or not if you do not already have a banking relationship with them.The reason is that my experience with Mortgage Brokers is that they are experts at tricking people into getting a loan with very unfavorable terms while convincing you that you are getting a great lean with an unbelievabley low rate.For example, in the process of refinancing my house an online mortgage broker convinced me that he had a 30 year fixed rate loan at 4.75%.Only at the sign off did I discover that this was actually an adjustable rate loan with only a fixed payment calculated as if the rate were 4.75%. The actual rate on this loan was 9.75% with the unpaid interest added to my principal balance (negative amortization)The reason that Mortgage Brokers do this is that they are paid a kickback or Yield Spread Premium as they call it if they can sell you a very expensive mortgage. These kickbacks can be $15,000 or more. The actual fee that an homest broker will get for an honest loan is only $1,000 or $2,000.Many dishonest Mortgage Brokers have become very good at convincing people that they have these unbelievably low rates, then change the terms and bury those terms in a mounian of pages of fine print. Unless you read all of those pages in great detail at the sign off and understand what the language says you can wind up with a very bad and a very expensive loan instead of the fantastic rate that they told you that they were giving you.At the sign off with the Mortgage Broker's friendly title company my experience was that they title officer put a great deal of pressure on me to sign pages wihout actually reading them. Sone of the print was so small that I had to ask for a magnifying glass to read it.I discovered that the terms of the loan had been changed on me at the sign off to the very bad laon that had an actual interest rate os 9.75% instead of the 4.75% that I had been promised.I stopped the sign off, picked up all of the papers an walked out of the title company. That is a very difficult thing to do. Most people do not have the determination to that when faced with an angry title officer. Also, you really have to know what you are doing to even understand the terms of these loans or even find the actual terms in the mountain of paperwork that you are given to sign. In my case I am certain that the title officer was in cahoots with the Mortgage Broker to try to hide that actual terms of the loan from me. The Mortgage Broker sends this title company a lot of business and for the amount of money involved I would not be surprised to discover that the Mortgage Broker was bribing the title officer to hide the actual terms from me and just get me to sign off as fast as possible.After I walked out of the Mortgage Broker's title company I went back to my bank where I have my checking and savings account and got a true 5.25% fixed rate loan for 15 years.I chose the 15 year loan over the 30 because the interest rate was substantially lowere than the rate on the 30 years loan and I would pay it off sooner, although the required monthly payments are larger.

[miasophia]

If you can a fixed rate for at least 6.50% then go for it.

[zealnik]

A few things to consider:1. Do you have a prepayment penalty? These can be pretty steep penalties if you've had the loan for less than 3 years (although prepayment terms could be shorter).2. Will the rate be lower by enough percentage points to make up for the cost of refinancing. For example, on a $200K loan, if your mortgage has $5000 in refinance fees, this amounts to 2.5% of your outstanding balance. If you are talking about dropping your rate by 1/2 point, it'll take around 5 years to make back the 2.5% you are spending today to get the loan.3. Do you plan on staying in the home for the rest of the 4 years left on the hybrid loan? If you are going to move in a few years, I'd probably just stick it out. No reason to go through all the paperwork unless you will receive long term benefits.4. What is your outlook on future rates? While the house market it weak and may drag down the economy (implying the need to lower rates), the devaluation of the dollar may result in raising of rates (to attract foreign money back to the US, making our $$ more valuable, making oil and other imports relatively cheaper than they are today).5. How much equity do you have? If you have little or no equity, you may not be able to find a new loan, and if you do, it may cost you more, even though rates are down, generally speaking. This is because: a. banks lost a lot of money on loans made in 2006 and wont want to make the same mistake twice. High risk loans are either unavailable or expensive. b. your appraised value may have dropped over the last year or so. If it did, your loan-to-value will go up, which is the #1 or #2 factor in determining your rate (along with FICO).Bottom line, I would shop around for a much better rate (in the 6% range) but would not refinance if you plan on moving soon, have a prepayment penalty, cannot get a sizable difference between the new rate and old rate (say at least 1% difference), expect rates to continue to fall, or have fees associated with the loan that will take years to realize. Keep in mind that your interest rates and out of pocket fees are directly related... a broker can do a loan with no fees, but in exchange you get a higher interest rate because the broker can sell your high interest rate loan for a profit and use the profit to cover your fees. You need to consider both RATE and FEES (aka PRICE).

[JorgeB]

before you refi you need 6 month in the home and you have that. THe equity or value of the home has to increase and it does not do that in six month and actually may have decreased. The closing costs will eat your savings . and you still have 4.5 years for any changes I WOULD STAY PUT and refinance in two years when the value has increased the pre payment penalty has expired ( maybe 3 years check your mortgage) and you have better overall conditions for refi