Posted on: 22nd Feb, 2011 02:49 pm
My husband and I currently owe approximately $415,000 on our current home and have a ARM at 4.25% which will end in 2014. With dropping interest rates how low will the fixed rate mortgage (30yr)have to drop in order for us to convert sooner and not lose too much money in related fees? Are there any formulas/calculators that can answer this question.
there are no formulas.
rates are higher now than they were sevral months ago.
they are still low. not really predicted to be much lower.
the question is not how low should the rate be to refinance to a fixed rate.
the question is how high a payment are you willing to accept when the rate starts adjusting and if you do not like a higher adjusted rate and payment on the arm, how would you feel about refinancing to an 8% rate fixed.
no one can predict the future. rates in 2014 could be low or high or medium.
if you plan to be living in the house for 3 or more years past 2014, i would consider refinance to fixed now. i pick those number of years because if worst case and your rate goes up 2% for each of three years, you would be at the point where you used up all your savings from the lower rate and you will lose money after that.
if the rate cap on your first adjustment is 5% and not 2%, i wouold refinance asap.
rates are higher now than they were sevral months ago.
they are still low. not really predicted to be much lower.
the question is not how low should the rate be to refinance to a fixed rate.
the question is how high a payment are you willing to accept when the rate starts adjusting and if you do not like a higher adjusted rate and payment on the arm, how would you feel about refinancing to an 8% rate fixed.
no one can predict the future. rates in 2014 could be low or high or medium.
if you plan to be living in the house for 3 or more years past 2014, i would consider refinance to fixed now. i pick those number of years because if worst case and your rate goes up 2% for each of three years, you would be at the point where you used up all your savings from the lower rate and you will lose money after that.
if the rate cap on your first adjustment is 5% and not 2%, i wouold refinance asap.
You will lose money regardless because your payment will go up and not down. So you will not recover the costs of the loan. I agree with the evaluation above - rates may never be this low again and you may have aready missed your best chance - it is crazy that 5% seems high when historically it is still incredibly low......I would look at pulling the trigger unless you are a gambler or ok with going into another 5 year ARM in 2014 if rates are up.
Good Luck
B
Good Luck
B
