Posted on: 11th Jul, 2010 04:11 am
hello,
my mortgage is going to adjust for the first time after 5 years in april 2011, based on a 2.25 + current index of 12-month libor rate at such time next year. i've done initial calculations based on current and future (estimate) libor rates and the result is palatable. nonetheless, they are estimates. on the other hand, if i refinance now, i either have zero equity or even underwater. i'm caught between taking the risk of ending up with a higher (or lower) monthly payment in april or putting down a huge amount of hard-earned money now to increase my equity on a refinanced new loan.
any advices, ideas or same experience here?
thanks,
gerard
my mortgage is going to adjust for the first time after 5 years in april 2011, based on a 2.25 + current index of 12-month libor rate at such time next year. i've done initial calculations based on current and future (estimate) libor rates and the result is palatable. nonetheless, they are estimates. on the other hand, if i refinance now, i either have zero equity or even underwater. i'm caught between taking the risk of ending up with a higher (or lower) monthly payment in april or putting down a huge amount of hard-earned money now to increase my equity on a refinanced new loan.
any advices, ideas or same experience here?
thanks,
gerard
My guess is that you are not paying mortgage insurance now, so the amount you would need to put down would be even larger. Your best bet is to investigate whether your loan is owned by Fannie Mae or Freddie Mac; if so, you may be able to refinance up to 105% of the value without the mortgage insurance. If not owned by either GSE, you may have to let it adjust. Currently, if it adjusted, it would adjust to 3.5% (2.25 + LIBOR of 1.146 = 3.396 rounded up to nearest 1/8th = 3.5%. Who knows what it will be in April, but short of bringing in cash, those are your 2 options.
With rates being as low now as they've been in 50 years, it would seem that the gamble you took back in 2006 was worthwhile. In light of the value issue you're suffering from, it'd seem unlikely that you'll be able to refinance at all, unless - as you noted - you plunk down a goodly sum of money on the existing debt.
I wouldn't dare to predict what rates will be like in 9 months, but I will offer a thought that you may well be just as well off sitting tight on that loan. Plunking down some, if not all, of the funds you're thinking about using, might also benefit you both short- and long-term.
The current situation isn't going to be cured with any real swiftness, and rates are an imperative when it comes to the recovery we are all seeking. That leads me to surmise that the LIBOR deals won't be particularly unattractive in 9 months, and that sitting still won't be particularly harmful.
It's all guesswork, but we do our best to make those guesses educated.
I wouldn't dare to predict what rates will be like in 9 months, but I will offer a thought that you may well be just as well off sitting tight on that loan. Plunking down some, if not all, of the funds you're thinking about using, might also benefit you both short- and long-term.
The current situation isn't going to be cured with any real swiftness, and rates are an imperative when it comes to the recovery we are all seeking. That leads me to surmise that the LIBOR deals won't be particularly unattractive in 9 months, and that sitting still won't be particularly harmful.
It's all guesswork, but we do our best to make those guesses educated.
You could start making extra payments or upping your payment amount to increase your equity in preparation for a re-fi. With the marketing starting to recover, that might put you in a better position to re-fi in the very near future. I personally won't take out an ARM. I think that they call them ARM's for a reason - sooner or later they're going to want one!