Is it finally worth refinancing?

jbspookDecember 4, 2008

We purchased our home in 2004 with a 7/1 ARM at 5.25% through Countrywide. We plan to stay at least 10-15 more years. Right now 30-year fixed loan rates are at 5.25%. Is it finally time to refinance, or should I wait to see if rates will go even lower?

Some background - our house has just barely increased in value, but enough so refinancing shouldn't be a problem. I am a person who craves security, which is why I've been watching rates like a hawk ever since we financed with an ARM. I got the longest ARM I could when we bought, but I just don't feel comfortable with an adjustable rate. Of course, we have 3 more years before our payments would change.

Would love to hear your thoughts.


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I'm no expert...but personally, I would refinance while you can. My husband and I waited, and now our house is worth less than what we owe, so we can't refinance (and we're in a 5/1 ARM, with 2 years left before our payments change).

Personally, I'd take the safer route now and pay a little more for the monthly mortgage bill for the next 3 years on the fixed rate mortgage, then continue to stick with the ARM, and possibly find yourself in a situation where you really are stuck with it.

And how sure are you that your house has increased or held steady in value? When we spoke to the loan officer yesterday, he told us that appraisals are largely based on home sales within a certain distance from your home in the last two month period. Unfortunately for us, homes in our area have dropped by about $150 - $200k below what we purchased at (about 40%). So...we're screwed. This is the tool he showed us for checking recent comps.

    Bookmark   December 4, 2008 at 4:49PM
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The only thing worth considering, IMO, is whether or not you are willing to take a chance that the newly discussed 4.5% mortgages are going to become reality. We're looking at refinancing, too, and were quoted fixed 5.25 for 15 yrs and 5.0 for 10 yrs from Countrywide yesterday. It's a gamble at this point.

    Bookmark   December 5, 2008 at 6:55AM
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I thought the 4.5% loans were proposed only for first-time buyers.

    Bookmark   December 5, 2008 at 2:13PM
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I just paid off my fixed mortgage with a variable rate home equity loan. I was paying 6.75 on my first mortgage and the variable home equities came down today to 3.2. I also paid off my car loan which I was paying 4%. When the fixed rates drop to 4% I'll refinance and pay off the arm. I'm dizzy with all this, but I think rates will stay down and I'm willing to gamble with the variable until the fixed drops.

I bank at Chase and spoke to the manager today and she said the fixed home equities will probably drop to 4.5 next week.

    Bookmark   December 5, 2008 at 10:40PM
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Chisue, the 4.5% rate may be for first time buyers but maybe not. I've not seen anything that's clear on this. However, with 10 and 30 yr Treasury Note/Bond yields dropping and staying low, garden variety refinancing should be dropping, too. That's what we're tracking.

    Bookmark   December 6, 2008 at 6:04AM
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That "tool" was way off! I put in the home we sold 2 years ago and it showed no selling price Available at all. It had the cost of the house inflated to $60,000 over what we sold for!
Now, 5 to 6 years ago we would have gotten that $227,000, but that is not true today nor was it true 2 years ago.
Kathy G in MI

    Bookmark   December 6, 2008 at 11:06AM
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IHi jbspook,

I checked the rate on my fully secured Line of Credit at the Canadian bank a couple of days ago - prime ... 4.0%.

While the N. American rates may go lower for a while, the U.S. govt. owes huge amounts of money, and if I were the overseas holders of trillions of their debt, with all of the recent bail-outs, and probability of more to come, piled on top of the leaky rainbarrel called the Iraq war ...

... I think that I'd be telling them that I really didn't want to lend them any more money ...

... certainly not at the recent low rates of interest.

A stock that had promised a buyout at $42.75 to go private just before the U.S. sub-prime and funny-bunny commercial stuff debacle hit the fan last year, has been finagling back and forth, dealt with bondholders' lawsuits, delayed consummation date, etc. ...

... now says that the deal is off: can't be handled at acceptable risk.

Stock prices hung around the high 30s, 40, down to low thirties ... now have dropped to mid-20s (which is where some analysts say is more or less appropriate).

So - some funds that I figured to be available to deploy elsewhere soon - have disappeared in a cloud of smoke.

I believe that markets are low now, and have been buying periodically for the past couple of years (after having declined for some time, previously).

Right now I'm digging up some more share certificates, and having mutual fund certificates issued as collateral and backup to support some more forays into the market.

Who knows how far down the market will go? Or how it may take to get there?

Not much fun, though ... watching the departing train get smaller in the distance ... with you not on board.

I've been playing these games for 50 years and may I make a suggestion, jbspook?

Don't let the money business spook you - learn how money works ... make it work for you.

Treat it with respect ... and have some cushion available - it's tough getting caught naked in this game.

BUT - show your money who's boss. Money makes a great servant ... but a terrible master.

Now, nearing 80 and in good health, I had about 80% of my assets in equities a while ago, then it was somewhat less, after the market drop, but I've bought some more recently ... that promptly went down some more!

Former cash on hand has been pretty well depleted ... so I may be somewhat less than 80% in equities, now.

Anyway - I hope that you make a wise choice with regard to your plan to deal with your mortgage.

One that, four or five years down the road, you'll be pleased to have made.

ole joyful

P.S. I think that there's a growing feeling that the U.S. Dollar, in the light of the recent piling up of debts, and printing all of that money ...

... is in increasing jeopardy as the world's premier currency.

I hear talk the last couple of days of the possibility that the Russians may act to back the ruble with gold.

Just watch what may take place ... if former rubble changes to valuable ruble ... that may change to gold.

They have huge levels of resources.

That are going to be in increasing demand, as the third world gets on its feet.

They ain't gonna give 'em away free.

Or be willing to let furriners come in and buy 'em up cheap, as we stupid Canadians have been willing to do for years ... including our precious oils and gas reserves.

ole joyful

    Bookmark   December 7, 2008 at 2:44PM
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We've decided that the answer is yes, it's worth it now. We're replacing an interest only jumbo (on which we've made some prin. pmts.) with a 30 yr. fixed just under 5% plus a HELOC @ P+1%; no points and minimal closing costs. We'll have to reduce the prin. slightly to get the LTV to 65%, but will be able to replace the funds we take from savings in less than a year due to the combined pmt. reduction.

We've refi'd other houses when the payback was under three years, but never had a situation in which the B/E was six months. It's the one bright spot in an otherwise bleak financial situation. Well, that and the fact that we've finally paid off all medical expenses from the last year & a half (bills kept showing up from hospitals and doctors as much as 10 mos. after a particular procedure.) yay!

    Bookmark   December 12, 2008 at 9:05AM
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