Quicken Loan Calculator
We bought the house a year ago and the APR is at the moment 6.75 (30 year, fixed). We owe around $ 172000 (not counting the residence equity line, 21K). I was just searching at Quicken loans and saw tone of ways to save income utilizing their calculator. Stuff like “Wise Option 5-year” and ARMs. Ought to I bite?
We will not be in the property more than 5 years from now.
The property is worth about $ 220k and there shouldn’t be a issue reselling. It’s in a very good, new region.
Answer by Errrk
You did not say what your house is worth. If you know, Know, KNOW that you will not be in the residence for more than 5 years, then go for the 7-yr ARM. Lots of men and women took 3 & five year arms a couple of years ago and are reGRETTing it.
Related Loan Info
Do not get into an ARM. I understand that you don’t want to be in the home in 5 years, but what if you can’t sell it & your ARM adjusts ? You may be in the same situation as thousands of homeowners not being able to refinance because the value of the home has dropped! Do you have any equity in your home? Probably after 1 year, no! Is your APR 6.75% or your interest rate 6.75%? There is a difference, it is not the same.
If you don’t have to refi, don’t! Stay where you are at.
First I just had the worst experience ever with quicken loans. They kept upping the amount of money I had to bring to closing. One week before when it was too late to get another lender my closing costs went up 5000. Second 6.75 is a good interest rate now. Third you will probably have to pay so much for new fees and closing costs that it will not be worth it to refinance right now, because you have only been in the house 1 year. Lastly house values are dropping and if you already owe 193,000 you are probably upside down if you had to sell….
I have to answer this question every day for my customers. Arms are not bad as long as it is appropriate for the situation. They are often not explained correctly. Just please know who you are loaning from. If you know for sure that you will be selling your house in 5 or less years, than a arm will work for you. I have a 5 year arm right now for 5.49% and a month ago I had a 10 year arm for 5.49%. Rates are now going up so if you are going to do it, do it now. P.S. you shouldn’t be paying that much in closing costs. Our closing fee was $ 150.
Think twice before you refinance it. The 5 year ARM rate is about 5.5 to 5.8% and fixed rate is about 6.5% (assume you have excellent credit). 5 yrs later, the 5-ARM loan will turn to adjustable and rate will go up. You said you plan to sell it in 5 yrs but what if the house value drop to below your loan amount. I’m saying you may have to sell at $ 150k or even $ 100k 5 yrs later. Then you’ll have to make the difference cos’ you owe the bank total of $ 193k. Are you willing to pay $ 43k or $ 93k to sell your house? You may save some money in the first 5 yrs with 5-ARM but after that…. You should do the calculation yourself.
BTW, don’t think about short sale or foreclosure is an option. It’s not an option to homeowner and you never want to go through one in your life.
Based on your scenario..Defenitely not! In your case two factors play a critical role in your decision making…Rate of return on the cost of refinancing and risk factor.
1. Sell the sizzle not the steak is what a lot of sales agent try to do and in mortgages the rate is the sizzle and the monthly payment is the steak. You should focus on how much it is going to cost you to refinance your mortgage then you should compare how much you will be saving monthly. If you get a descent return on your investment (which is the cost of refinance then go ahead and do it IF and only IF you are willing to take the on the risk factor.) Just to give you an idea..if you currently have a 6.75% int rate and are being offered a 5.5 5yr ARM ( not a bad rate in the current market it will prob be higher than that) then the difference in monthly payments would be $ 111.19. That is a total of $ 1,134.28, $ 6,671.40 in 5yrs. I dont know much about your particular scenario to calculate total closing costs but they should roughly be around $ 5,500 in order to get a rate like 5.5. If that is the case you have refinance to save approximatley $ 1,100 if you sell in 5 yrs. It would make more sense to refinance if the 5.5 were a fix 30yr program and you were going to stay for much longer. You would also have to consider the amount of int you would be saving during the 5yrs on the $ 111.19 a month but it is not going to be significant during the first 5yrs.
2. Consider the risk factor…There is NEVER a guarantee that market conditions in any are of real estate will stay stable or net a profit. It is all specualtion and one can only guess. Besides that who knows what your financial condition will be in 5yrs. There is obviously a level of risk and you would have to consider if it makes sense to risk it all to save $ 1,100 in 5yrs. If you get in to this 5yr arm and decide not to sell or cant sell you could potentially loose your home or loose a lot i mean a lot more money than $ 1,100.
Hope this helps…good luck!
It all depends on ratios, appraisals, and income. You should look into it, there’s a chance of it being possible. But I’d leave the ARMs alone. And I’d shop around. Not lenders are the same.
Check out Loan-Com. info and do a search for refinance loans. They have dozens of loan programs available at reasonable rates and affordable terms.