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Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: Poundwise on July 05, 2018, 08:48:12 AM

Title: Refinance questions
Post by: Poundwise on July 05, 2018, 08:48:12 AM
Dear smart and knowledgeable MMM real estate folks,

We have the famous Penfed 5/5 ARM, currently at 2.5%. In a few months it will hop up to 4.5% (maximum is 2% over the current index rate, which used to be LIBOR but may now be the 5-Year Treasury Constant Maturity Rate ). In 5.5 more years, it could go up to as much as 6.5%. Not sure if we will be in this house by the time that the highest rate rolls around; we would like to move within the same town but we are lucky to have flexibility. House values in our area will likely be steady or continue to rise.

Penfed is offering us a rate reset of 3.8125% for a nominal fee of $500. It amounts to paying a half year at this higher rate in return for another 5 years at the new rate rather than 4.5%. It would be a savings of over $10K on our jumbo loan.

Should we grab this offer now, or shop around?  It looks like rates are going up over time but I was thinking we might be able to get a rate a few tenths of a percent lower if we check every day for a month. I am concerned that the offer will vanish if I spend too much time searching for a better deal (I've never refinanced before so there will be a learning curve and I'm not sure where to start.)

Title: Re: Refinance questions
Post by: CptJack83 on July 05, 2018, 10:26:05 AM
I'd lock that in!

Closing costs on a New Loan would be well over $500 and 3.8125% is solid for a new 5 year fixed period.

Only thing to debate is whether you ride the 2.5% a little longer and look to refix it in a few months...I wouldn't try and be greedy, but that's up to you.  Short term rates (which impacts ARMS) are rising steadily and appear that they will continue to do so through the end of the year.
Title: Re: Refinance questions
Post by: Poundwise on July 05, 2018, 11:37:57 AM
Thanks, that's what I thought!

I've been looking at 5 year treasury forecasts, and though it looks like they may go down slightly in the next month or two, ultimately the trend is upward.