Posted on: 07th May, 2007 04:14 pm
i have an interest only, arm with indymac bank.
the loan is fixed until 2011, and then it will adjust.
i\'m getting an offer from them to refinance. the new loan would be another interest only arm wich would be fixed for 10 yrs. it would reduce about $120 from my monthy payments, and give me 12,000. in cash.
does this sound good to you? does having the my current loan adjust in 4 years mean that the interest would be paid by then, and having the 10 yr loan would mean alonger (and bigger) interest payment?
i bought my home in 2006. i\'m very tempted to refinance, but i don\'t want to make a mistake!
the loan is fixed until 2011, and then it will adjust.
i\'m getting an offer from them to refinance. the new loan would be another interest only arm wich would be fixed for 10 yrs. it would reduce about $120 from my monthy payments, and give me 12,000. in cash.
does this sound good to you? does having the my current loan adjust in 4 years mean that the interest would be paid by then, and having the 10 yr loan would mean alonger (and bigger) interest payment?
i bought my home in 2006. i\'m very tempted to refinance, but i don\'t want to make a mistake!
Hi Imanna,
In interest only mortgage you are just making the interest payments while the principal amount is remaining the same. At the end of IO period the payments will rise as then it will be calculated to fully amortize the payments over the rest term of the loan for the same principal balance with most likely higher interest rate on your arm.
You need to check if you are expecting value of your house to appreciate within these 10 years and whether you would sell after 10 years. If house does not appreciate then there will be no equity in the house for you to utilize because of the interest only payments you would be making.
If you do not plan to sell then after 10 years you will have higher mortgage payments to make, you need to also consider if you would be able to make the payments that time.
Miller
In interest only mortgage you are just making the interest payments while the principal amount is remaining the same. At the end of IO period the payments will rise as then it will be calculated to fully amortize the payments over the rest term of the loan for the same principal balance with most likely higher interest rate on your arm.
You need to check if you are expecting value of your house to appreciate within these 10 years and whether you would sell after 10 years. If house does not appreciate then there will be no equity in the house for you to utilize because of the interest only payments you would be making.
If you do not plan to sell then after 10 years you will have higher mortgage payments to make, you need to also consider if you would be able to make the payments that time.
Miller
"Does having the my current loan adjust in 4 years mean that the interest would be paid by then, and having the 10 yr loan would mean alonger (and bigger) interest payment? "
Your present loan would be adjusting in another 4 years means that you will continue making just the interest payments. And after that you will have to pay fully amortizing amount for rest of the loan period. The new loan will mean longer interest only payments i.e., for the next 10 years, but interest rises or not will depend on the features of your arm.
Your present loan would be adjusting in another 4 years means that you will continue making just the interest payments. And after that you will have to pay fully amortizing amount for rest of the loan period. The new loan will mean longer interest only payments i.e., for the next 10 years, but interest rises or not will depend on the features of your arm.
Looks like a reasonable offer to me. IO payments for the next 10 years would help you manage your financial resources properly and then try to refinance after that when the payments would increase.
You can also expect the house price to rise resulting in building equity and be able to sell it off. Is the interest rate remaining same with the refinance?
Colin
You can also expect the house price to rise resulting in building equity and be able to sell it off. Is the interest rate remaining same with the refinance?
Colin
Selecting this offer or not will basically depend on your plans for the next 10 years. If your income is going to rise then you will be able to afford the higher payments in future.
Next thing is what if you plan to sell the house after 10 years and house value does not appreciate! Or rather value goes down!
Next thing is what if you plan to sell the house after 10 years and house value does not appreciate! Or rather value goes down!
I typed a post and I don't know what happened to it. Anyway, thanks for the replies!
My current interest rate is 7.750%, and the new rate would be 6.818%.
I bought the condo to have a place to live, I don't have any long term plans, I mean, I could live here forever or sell it later on. I don't think the prices will go down as they haven't for a long time in this area. the market has is slower now, but I doubt that value won't go upfor ten years.
However, I don't know the closing cost yet. That could put a halt to everything.
My current interest rate is 7.750%, and the new rate would be 6.818%.
I bought the condo to have a place to live, I don't have any long term plans, I mean, I could live here forever or sell it later on. I don't think the prices will go down as they haven't for a long time in this area. the market has is slower now, but I doubt that value won't go upfor ten years.
However, I don't know the closing cost yet. That could put a halt to everything.
Hi Imanna,
Welcome to our forums.
If you're thinking of a refinance at this point time, you're justified as far as lowering your monthly payments and getting cash is concerned. But even if you refinance, you will be getting again an interest-only ARM.
Now with an interest-only loan for 4 years, the unpaid principal is added to the balance which you start paying off at the rate offered on the ARM. But if you consider the 10 year interest-only, the principal accumulated will be much higher. Now, you need to compare the payments on the higher principal at 6.818% and the lower amount at 7.750%. You may use our ARM Calculator for this purpose. And in case you wish to gather more details on Interest-Only Mortgage, you may refer to our section on this topic.
Good luck
Welcome to our forums.
If you're thinking of a refinance at this point time, you're justified as far as lowering your monthly payments and getting cash is concerned. But even if you refinance, you will be getting again an interest-only ARM.
Now with an interest-only loan for 4 years, the unpaid principal is added to the balance which you start paying off at the rate offered on the ARM. But if you consider the 10 year interest-only, the principal accumulated will be much higher. Now, you need to compare the payments on the higher principal at 6.818% and the lower amount at 7.750%. You may use our ARM Calculator for this purpose. And in case you wish to gather more details on Interest-Only Mortgage, you may refer to our section on this topic.
Good luck