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I am thinking of possibly refinancing out of my 5 year adjustable, but I am concerned about my payment going up drastically. What do you suggest?
Brian D in New Haven, CT writes:
Stephen, I have noticed that rates have come down a little this month and I am thinking of possibly refinancing out of my 5 year adjustable. I was able to get a rate of 4.500% in June 2002 and I concerned about my payment going up drastically. What do you suggest?
Well Eric, nothing like the old days..but 4.50%, just like the 79 cent cup of coffee, is now part of history. The fact is that now may be an excellent time to refinance to a fixed rate. As you noticed, thirty-year fixed rate mortgages dropped from the high 6% range in July of this year down to the mid 5% range today. Unfortunately, your dream adjustable that has saved you so much money could turn really ugly when it adjusts next year. If it adjusted off the one year LIBOR today it would be over 8%, current fixed rates are in the mid 5% range…not too shabby. The big question you want to ask yourself is how long do you plan to keep the house. If it's more than two years, I would suggest refinancing.
Also, if you are concerned about the payment, ask you mortgage consultant about a fixed rate loan with an interest-only option and that payments stay low and the rate won't change.
Stephen
If you have a question that you would like me to answer please email me at Stephen@katzmortgageteam.com.
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