Posted on 01/04/2006 8:46:59 AM PST by Travis McGee
For your possible interest.
I did a 5/1, but only because I'll have the balance paid off in 5 years or I'll have moved.
I did a 3/1 ARM at 3% two and a half years ago. I knew I would be out of the home before the adjustment period started. Sold the house last week.
Yada, yada.....
I got a 3/1 Arm, 1 1/2 years ago at 3.5%.....
So I got a very low payment, I got accelerated principal payment, in year 4 it can only rise to 5.5% (still below current market rates) and in year 5, if I want to I can refi.
So no thanks, I'll keep the ARM.
The old ARMs aren't the problem, it's the interest-only part that's the problem. People are "buying" homes with interest only loans but are essentially renting them.
When most people got their ARMS (1 to 4 years ago), the ARM rate was dramatically below fixed rates and there was tremendous advantage to them. However, today, it is not unusual to ARMS with the same rate as fixed or only .25% below a fixed rate. No big advantage to ARMs currently.
Please add me to your ping list, thank you.
The fed is hinting that they are leveling off on interest rate increases. So ARM's don't look like they have a huge upside coming. In the mean time ARM holders have been able to pay off more principle than fixed raters.
that was my idea. i got a much lower interest rate to go with an intrest only arm. so i regularly pay over the minimum to work off the principal faster.
Did you actually read the article? You are making a hell of an assumption there.
It's gonna be fun watching all those folks all rushing to the door at the same time, trying to sell their homes. Gee, I wonder what's going to happen to the prices?
It's a very low-volume ping list, maybe once a week.
I've also got a 2nd Amendment ping list and a Civil War Two ping list. Do you want to be on them as well?
Yep. They have no clue. Folks have negative amortization loans, and don't even understand the concept.
Please, thank you.
"No big advantage to ARMs currently.
"
That can be true, except they're still peddling the interest-only option on these, leading the buyer to wrongly think they can afford a property they should probably avoid.
If I were one of these folks, I'd be looking closely at what the payment's likely to be when the loan converts, then either refinance now or plan a sale at least 6 months in advance of the conversion date. To be safe, 9 months would be better.
The young couple who bought my former house in California financed it this way, against my advice. Trouble is that now there's a problem there. The sewer that was supposed to be built in that small coastal town is stalled, and there are a bunch of lawsuits and regulatory fines looming.
Homes in that community are virtually unsaleable for the moment, since there are so many financial unknowns. Now, they're about to hit a conversion date, and it's not going to be pretty for them.
They pretty much maxed out their purchasing power to buy that house...and it was the cheapest house on the market at the time. I warned them that they were flirting with danger, but they're about 30 and think nothing can go wrong in their life.
I had another offer on the house, too, so I tried to convince them not to do it, but they wanted a house in that town and they wanted it then, so I went ahead with the sale.
I hope they come out OK on it.
It's also going to be interesting to watch them begging for a new refi, when the bank doors are slammed in their faces. So many folks just assume that easy refis at low rates are some kind of naturally occurring phenomenon!
No assumptions, I read my contract with the mortgage co.
On the ARM--worst case scenario--I have to keep it. Given that the ARM had a low initial rate my principal has been reduced more than it would have under a conventional loan.
So each year I run interest rate risk, after the initial lock. As I did not stretch to buy the house, this is not a huge worry.
Realistic scenario--I move or refi within 5 years.
What, besides loss of job or major credit problems would prevent him from refinancing?
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