Posted on: 06th Mar, 2007 11:11 am
The MTA index on the option ARMs have gone up to 5.014%. Remember, index + margin = full interest rate. Most option arm full interest rates are about 8.25% or 8.5%. Currently, the conventional loans range from 6 – 6.5%. It's a great opportunity to get everyone with option arm loans, out of it. They will probably save over $200/month, even if they paid off the prepayment penalty. Focus on the overall savings, and not the cost of the prepayment penalty. Paying off the prepayment penalty may be worth the stress and financial freedom in the long run. OH yeah, tax deductible possibility…always consult your tax advisor.
Very good information Wablola, it will certainly help people with option arms to think about the possibility of refinancing to a conventional one.
David
David
I have seen many people who are not even aware of the type of loan they have got & why the rate on their loan always keeps going up.
1year mta is based on the 1 year treasury yields which has been increasing for a while now. I will also suggest those with option arms to change there mortgage to some fixed rate option if they have not done so yet.
1year mta is based on the 1 year treasury yields which has been increasing for a while now. I will also suggest those with option arms to change there mortgage to some fixed rate option if they have not done so yet.
Yes Wablola,
The MTA index or the 12 Month Treasury Average has been on an increasing trend since last December but this time the rise is quite steep.
Most of the Option ARMs rates are based on the MTA index. Therefore, rates on Option ARMs will be probably quite high and hence homeowners may be willing to switchover to conventional loans. And yes, it's better to think of long term savings rather than bother about a one-time prepayment penalty.
Thanks.
The MTA index or the 12 Month Treasury Average has been on an increasing trend since last December but this time the rise is quite steep.
Most of the Option ARMs rates are based on the MTA index. Therefore, rates on Option ARMs will be probably quite high and hence homeowners may be willing to switchover to conventional loans. And yes, it's better to think of long term savings rather than bother about a one-time prepayment penalty.
Thanks.