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Should I lock in a 30-year fixed from my option arm loan?
I have a 488,000 options arms loan that has 2 years left before I refi without pre-payment penalty. As of now the pre-payment penalty is 15,000. Got a quote from my loan agent at 6.125% for a 30-year fixed, no pionts and no cost. Estimate out of pocket $600. I plan to roll the 15,0000 into the refi. Should I bite the bullet and just refi. I estimate that I can save $600 from what I pay right now and be able to recoupe the amount in 31 months.
If I pay the 30-year payment on my option arm loan then my payment would be 3600. I plan to stay in the house for another 5-7 years. Rates look low right now. what should I do? Also, anything other questions I should raise with my loan agent. Got into bad option arm loan and now I am hesitant and want to get everything defined before I sign.
I am going with a different loan person this time and I am more comfortable with this person.
2 Answers
- 1 decade agoFavorite Answer
The option arm rates are going to go up. You are one of the smart ones for bitting the bullet and paying the prepay. Sorry that your last broker got you into one. Be wary of the 6.125% no point/fees/closing costs, I don't see that in the market, but if they can get it great! Ask them to lock the loan ASAP and send you a written confirmation of the lock. They may complain a bit, but any broker worth a spit will do it for you. It seems to me that you will be paying closing costs, fees, points but that they will be rolled into your loan amount. This is a shady or sometimes helpful way to do things. Just make sure you know what you are getting into. I was a broker for many many years so if you need any advise you can send me a message and I will give you my email. I am not a broker anymore so I am NOT trying to get your business just help.
Source(s): Broker for years - AllanLv 61 decade ago
As I understand your situation, you will recoup the pre-payment penalty in 31 months, but you will have no pre-payment penalty in 24 months.
The main issue here is whether you think rates will rise or fall over the next few years. It seems very unlikely that they will increase much beyond where they are now. The Fed has gotten inflation down to about 3 percent, which is consistent with a 6% rate over the next several years.
I would wait and see where interests go over the next 24 months.
Source(s): Economist for 20 years, specializing in finance and monetary economics.
