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How do I calculate a 5/5 ARM Adjustment? (Vanity)
Loan documents | 5/8/08 | My Bank

Posted on 05/08/2008 8:38:30 AM PDT by the_devils_advocate_666

In another year my home loan will adjust to the "Weekly average yield on United States Treasury Securities adjusted to a constant maturity of 5 years" plus 3.0 percentage points.

My current rate is 5.54% and I want to start considering a refinancing if it looks like the new rate will be a large increase (it can only go up a maximum of 2.0%).

So my question is how do I calculate the "Weekly average yield on United States Treasury Securities adjusted to a constant maturity of 5 years"? I tried to Google for the answer but didn't have any success.


TOPICS: Business/Economy
KEYWORDS: interest
Any thoughts on whether or not I should be considering refinancing are also welcome.
1 posted on 05/08/2008 8:38:30 AM PDT by the_devils_advocate_666
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To: the_devils_advocate_666

Google “ARM calculator.” Also try the financial sites like Yahoo Finance.


2 posted on 05/08/2008 8:41:43 AM PDT by NonValueAdded (Who Would Montgomery Brewster Choose?)
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To: the_devils_advocate_666

Your “new” rate will be 672.54% APR......in Chinese Yuan..........


3 posted on 05/08/2008 8:44:55 AM PDT by Red Badger ( We don't have science, but we do have consensus.......)
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To: the_devils_advocate_666
There is a tool on bankrate.com that allows you to graph rate trends, including several for treasuries, constant maturity. Not sure whether there is a five year.

In my opinion, it would be a very good idea to refi out of that variable rate if at all possible. Underwriting standards have tightened, so it might be difficult to qualify for a 30 year conventional at the best rate (which appears to still be under 6%) if you don't have at least 20% equity. If you're in a market that is experiencing significant price declines, you might even need more than 20%. No doc and stated income loans have all but disappeared, so you'll probably need to be able to verify income and assets.

4 posted on 05/08/2008 8:47:01 AM PDT by RegulatorCountry
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To: the_devils_advocate_666

You’re looking for the index “5-Year CMT.”

Currently it is at 2.84% - making your new rate 5.84% if I am calculating correctly.


5 posted on 05/08/2008 8:47:50 AM PDT by RockinRight (Supreme Court Justice Fred Thompson. The next best place for Fred.)
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To: the_devils_advocate_666

as of today, the 5 year constant maturity treasury interest rate is 3.15% meaning that if your loan reset today, you’d be paying 6.15% (i.e. 3.15 plus 300 basis points).

That’s not a bad rate. Will your loan be resetting annually from then on? If so, then it probably would make sense to refinance now, if you can. While 6.15% is great, who knows where interest rates will be 12 months after that, and 12 months after that. Myself, i’d be up at night worrying about it. Rates are low now, and you could probably get something fixed that’s pretty low cost, if your credit is good.


6 posted on 05/08/2008 8:48:48 AM PDT by babble-on
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To: babble-on

scroll down this page to see the rates, updated daily:

http://www.federalreserve.gov/releases/h15/update/


7 posted on 05/08/2008 8:50:24 AM PDT by babble-on
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To: babble-on
It does not "adjust" for another year and it is a 5/5 ARM, so it will not adjust again for another 5 years after that.

The property includes a "life estate" so the bank told me when I financed that a fixed rate would not be an option. Anyone know if this is always the case or just the case with my bank?

8 posted on 05/08/2008 8:52:57 AM PDT by the_devils_advocate_666
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To: babble-on

BINGO! Thanks, that’s exactly what I was looking for.


9 posted on 05/08/2008 8:54:10 AM PDT by the_devils_advocate_666
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To: babble-on

Is that May or April?

I found April ‘08 data showing it at 2.84%?


10 posted on 05/08/2008 8:54:16 AM PDT by RockinRight (Supreme Court Justice Fred Thompson. The next best place for Fred.)
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To: the_devils_advocate_666

Have you considered asking the company that made you the loan how they calculate it?


11 posted on 05/08/2008 8:56:35 AM PDT by RonF
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To: RockinRight

indeed it was much lower last month. As the stock market has recovered, some of the flight to quality into bonds has receded, and rates have been very volatile.


12 posted on 05/08/2008 9:00:01 AM PDT by babble-on
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To: the_devils_advocate_666

What are the details of the life estate? Is it you or someone else who holds the life estate? Normally, local banks don’t do fixed rate (or 30/15 year) loans, unless they meet the standards that allow them to be sold into the secondary market, because they don’t want to be stuck holding them on their books. The life estate is probably what’s tripping up meeting the standards. But depending on the details, you might be able to find a way around it.


13 posted on 05/08/2008 12:37:37 PM PDT by GovernmentShrinker
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To: GovernmentShrinker
The life estate is for an 85 year-old lady who was the original property owner. Her house and yard take up about 3 acres of the 25+/- acre property. From official deed papers:
There is excepted and retained from this conveyance of real estate, the exclusive us and possession of the residence, spring house, wood shed, shop, garage, and the surrounding lawn and garden areas. Such use and possession shall remain vested in [the lady] for her lifetime and six months following her death. [The lady] shall be responsible for the maintenance of the interior of the residence. The exterior for the residence which includes, but is not limited to, the roof, structural walls, foundation, and mechanical supply and discharge lines shall be maintained by the Grantee and his assigns. The structural integrity, appearance, and suitability of intended use of the above structures (except the interior of the residence) shall be the responsibility of the above said Grantee and his assigns. No structure shall be removed or altered without the consent of [the lady]. [The lady] shall be responsible for the real estate taxes and insurance on the residence and all contents therein.
Being that we have substantial equity in the property I was wondering if I might be able to split it into two deeds. One with the life estate free and clear of leans against it. The second with our home and the remaining property and no life estate. The second property being what we would be using as collateral for a fixed rate home loan. Just not sure if this is an option.
14 posted on 05/08/2008 1:20:00 PM PDT by the_devils_advocate_666
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To: the_devils_advocate_666

I’m confused. Are there two homes on this property that are currently covered by a single mortgage? And does the elderly lady currently live in one and you live in the other? I would assume that you could split the property into 2 deeds, as long as she agrees. If the value of the property remaining with your house is sufficient to support the entire amount of financing that you need, then I don’t see why you wouldn’t be able get a fixed rate mortgage on it.


15 posted on 05/08/2008 1:31:12 PM PDT by GovernmentShrinker
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To: GovernmentShrinker

Exactly, two homes on the property, one deed/mortgage. The catch is that in calculating the assessed value of the property they will not include the house and buildings covered by the life estate.

I probably need to talk to a real estate attorney w.r.t. splitting into two deeds.


16 posted on 05/08/2008 1:50:30 PM PDT by the_devils_advocate_666
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