First off, if you live in Michigan your housing value is way down and your house most likely will not appraise for the same amount it did a few years ago. So you may not be able to get a loan for that will cover the amount of your original adjustable rate mortgage.
Also, mortgage rates are not going down as the fed fund’s rate falls because lender are seeing much greater risk.
Get ready for your new mortgage to cost you.
I bought my home well under value. The market in Michigan is mostly being attacked by the DETROIT area. Over there, it is a complete disaster brought on by Jenny & the gang.
I am in Grand Rapids MI and we have seen a slight decline but we have not witnessed the same pain the people on the East side of the state have witnessed. For the most part, homes in good repair sell for decent value in the Grand Rapids market and the “new listings on market” has started to reverse.
As far as my mortgage goes, mine will go down as it is based on the 1 month LIBOR. I do not have to refinance at all. In fact, I will be paid in full within two years. The type of mortgage I have is the very same mortgage which will soon be gaining popularity here in the states and will RESCUE the USA housing market. It is set up like a commercial sweep account. It DOES NOT compound your interest daily and also allows you to use your income to drive the daily principal balance lower so you are assessed less interest.
When you can use your income in a mortgage equation, you will be surprised at how small a role the interest rate actually plays. Mortgages are about interest paid. Banks dont give a damn about your interest rate......they amortize your payment so you will most likely make a minimum payment anyway....they want your checking account more than your mortgage.
Think about it....you get a mortgage today and lets say you have a friend in the industry and they got you a
“great rate” of 5.75% FIXED for 30 years. Do you think your friend (or any mortgage loan officer at a brokerage or sitting behind a desk at a bank) has the nerve to tell you that that wonderful rate also comes with the 8th wonder of the world known as compounding interest? Did they tell you that same interest is also calculated 30 days in arrears? I will bet they didnt. IMHO 30 yr fixed rate mortgages are the single most destructful financial instrument devised by the banking system. They are more responsible for the housing crunch than ARMS and the subprime mess we have today. For people who need to access their equity, they have to spend thousands in refinance costs and fees.
I throw my entire income at my mortgage payment. All of it. When I do, the day my deposit goes in, it instantly decreases my principal balance. At the end of the day, I am assessed interest for that daily balance. What is nice is that my daily balance is lower because of my income driving the loan. If I need cash, I just write a check (which is attached to the mortgage) and my balance goes up the amount of my withdraw amount. No fees, no change in interest rate, no crazy 18% interest on a line of credit. While my income is in my mortgage, it is saving me interest and since my interest paid is less....I pay more principal down. Mortgages are all about interest paid....ask any bank.
Easy example......you and your neighbor both take out a
$120,000 mortgage.
you take out the mortgage type I have and your neighbor goes and sees his buddy at the bank and gets 5.75%
We will assume you each make $60,000 per year and the payment on $120,000 is $700 per month which includes taxes & insurance. Neither of you have any additional outside debt. Here is how the two of you would fare:
YOU
Payoff in 11.3 years Only pay $27,466 in total interest to the bank. Not too bad
THEM
They pay off in 30 years. Pay $132,103 in total interest.