I have a 30yr fixed

The loan you are being offered is an optin arm. If you pay the 1.95% payment you will defer interest in other words the amount you are paying will not cover the balance of the interest payment and your principle balance will increase on a monthly basis. The rate is not fixed either it will adjust at least on an annual basis.

There may be some better options available to you. Can you give us a little more information about your situation. Ie credit scores tha value of the house and what you owe on it.

My cdedit score is 649, the home value is685000. I am retired, and need to finanece a least 500000.

Has your lender or broker given you a good faith estimate?

All I have is an email with estimate but it is not detailed, When I req the inf the broker said that he would include all the inf with the appraisal report.

As you are retired and less likely to increase your income in the upcoming years, I would advise AGAINST the loan program you have been offered (aka Option ARM, Pick A Pay, Neg Am loan)---here's why:

a. If you intend to pay the min. payment amount (the payment based upon 1.95%)---the difference between the interest only payment and the minimum payment will be added to your mortgage principal.
b. Continued use of the min. payment option will accelerate the recasting of the loan---when the loan recasts, your mortgage payment goes up.

If the lender/broker you are consulting with hasn't fully disclosed the loan options, you will find that the I/O and fully amortized payment will most likely be higher then what you currently have now.

Given what you have shared thus far, the ONLY circumstance that this MIGHT make sense is if you intend to sell the property before the loan recasts.

There might be another option for you if retirement means that you are 62 or older---you could consider a reverse mortgage (and potentially eliminate the payment issue altogether).

Regards,

Scott Miller

Hi scott,

What is recasting? is it just like refinancing?

Recasting is unique to the type of loan you are considering (option ARM).

Recasting is defined as the recalculation of interest and principal payments based upon the unpaid principal balance + deferred interest + prevailing interest rate + amount of time remaining in the loan.

At 1.95%, I am going to speculate that the loan being offered recasts every 5 years...

Regards,

Scott Miller

Sorry, forgot to log in previously---that's me posting above as "guest"...

Thanks Scott. Would surely consult you if i have any query.

I have decided not to refinance, when I received the loan paperwork, I did an amortization quote and my mo amt was so high that I could not afford it. Unfortunally I am only 60 so the reverse mortg. wont work. THANKS FOR ALL YOUR HELP.

Yes, this offer for a cosi will not be a good option to select. You should wait for some more time to get better offers, let us know about it when you get new offers and we will try to analyze if it would be suitable for you or not.

Miller

Thanks, I will keep you posted on future offers. Nery*

But Nery, what have you thought of then? Will you be continuing with the fixed rate loan. I too feel that going for a refinance, that too, with an ARMs may not be a good choice because perhaps you are unable to manage the fixed rate loan which has almost fixed payments. It happens sometimes, but what about refinancing into another fixed rate with lower payments? Have you talked to the lender about any such option?

hi, can anyone give me some idea of COSI loans?

Sure Williams, just take a look at a previous discussion on COSI loans.