so I’m currently 3 years into a conventional 30 year @ 5.5 APR
thinking of refinancing to penfed’s 5/5 arm. I’m one of those people who has been trained to think ARMs are BAD stay away, but this might work out nicely.
Follow the link for the fine print, but I would be cutting my payment a lot. Even if the APR went up the max 2% every 5 years I would still be ahead.
thoughts?
Signing up for an adjustable rate on a long term loan when rates are at historically low levels seems like a bad idea in so many ways.
I agree if you don’t look deeper than the surface.
I’m pay 5.5% today.
I could drop that to 2.9 for the first 5 years while my balance is highest. The next 5 would by 4.9 (at the very most).
I’ll be miles ahead on savings and can always refinance again IF I even own the home that far out. The highest it can ever go is 7.961 and that’s unlikely but even if it did happen I’d probably still be ahead in the big picture.
or am I missing something?
Couldn’t agree more…
I just refinanced through Citizens Bank earlier this month. I was with Chase with a 30yr @ 5.0% fixed and switched over to Citizens, now at 20yr @ 3.75% fixed. My payment went up $14 and I chopped off 7.5 years (been in the house for 2.5 years), in total I saved +$110k in interest of the life of the loan vs. my 30 year.
No one locally could beat Citizens rate or closing costs…not even close. No I don’t work for them, just had a great experience.
If you want a contact over there let me know.
penfed has no closing costs on this so they just beat you.
doing the quick math in my head under the worse case scenario the penfed loan would lose to your one something like 15 years in to your loan. use the savings to prepay and penfed wins for sure. sell your house in 10 years like most people do and it wins by a mile.
you guys are talking me into it while saying it’s a bad idea so far.
Yeah, I was looking to Refi my house before we decided to move. I would look more into trying to refi at a lower interest, for a shorter term. When I looked at mine, I was able to go down to a 15 yr fixes at 3.2% that was only $12 more a month than my current mortgage, but half the time. Since I was already adding an extra $50/month onto it, I wouldn’t have noticed the difference.
Looking at the mortgage rates from my bank: https://www.visionsfcu.org/rates/mortgage.php You can get a 20yr Special for 3.75% fixed. (The special part just means it will never be sold to another company as they typically sell their 20 and 30yr mortgages.) That’s not a lot higher than what you are looking at now. However, looking at the fine print, the 5/5 will adjust every 5 years, by no more than 2% each year, and no more than 5% from the initial amount. So you could max out at 8.125%. Also, on the low end, they say that the rate is the index plus 2.00, so it appears the lowest you could get is only 2%, so it seems like there is a lot of room to move up, but not a lot to move down. You are also taking the gamble that the rates are going to stay this low for 5 years. There is a chance they could shoot up, so that by the time you do refi, they could be back into the 5-6% range again, which would really negate any savings you picked up in the ARM.
I know you watch the markets better than I do, but I can’t see paying the closing costs every couple years to refi at a better rate. Seems like you might not recoup the costs, again negating the benefit of the refi
you’re reading it wrong, it only adjusts once every 5 years by no more than 2% (for the 5 year period). If this adjusted yearly I would never consider it. Also no closing costs w/ penfed.
also, your 20 year special is only with a point and there are closing costs.
Yes, so if it does max out after the first 5 years, it will be 5.125%, which is much higher than 3.75% from my example. The 2.875% in the image is based on today’s numbers, and is also a little mis-leading, since in 5 years, it could be the 5.125%. It also stated that that rate is for the next 300 months, but it actually changes every 5 years, not just once after 5 years.
I did not see that there were essentially no closing costs for this, but there would still most likely be closing costs at the end of 5 years if you were to refinance, which could reduce the savings you are factoring in.
I guess to be, there are too many ways that you can be screwed to make it worth the gamble, unless you plan to have the house mostly paid off in the next 5 years.
Not sure what special 20 yr he is looking at, I had no points with mine and minimal closing.
Your main goals of refi should be to: lower interest, decrease overall term and get rid of PMI/MIP (if you currently have it) if you can appraise over 20% equity.
Go ahead with you ARM and when it goes up 2% every 5 years come back here and make a thread about how sad you are…
Looks like it covers almost 100% of closing, from what I read quickly it wouldn’t cover NYS Mortgage tax 0.75% of total loan or the interim interest.
Using the following calculators:
I’m just looking at the final amount after the first 60 months of the ARM, and a 20yr Fixed.
Using a 30 yr 5/5 ARM at 3.125% on a $200,000 loan, At the end of the 5 years, you’ll have an ending principle of $178,215.72 with your payment being $856.75/month
Using a 20 yr Fixed at 3.75% on a $200,000 loan, at the end of 5 years (Jan, 2017) you’ll have a $163,055.56 and a payment of $1185.78
So I guess it would depend on if you could use the extra money, or if you planned to put the money onto the principle each month.
Looking at the numbers, I would probably consider doing the ARM, but paying on it at the same rate as the 20 yr. Doing this, in the given example, would allow you to pay off $80,000 in the first 5 years. But if you plan to just make the minimum payment on it, I would do the 20 yr fixed rate for sure.
double post
It won’t cover title insurance premiums which are minimal, I don’t see anything about NYS Mortgage tax? I’m counting on crushing your 3.75% for 20 between the no closing costs and making my current payment still to cut things down a lot in 5 years. It’s a gamble, but a very safe one.
I’ve been playing with the same calcs. and got the same conclusions. I think you can see why I’m interested. Plus if times ever did get hard I have the luxury of backing down my payment to the minimum. I can see why people on a lot of financial forums LOVE this loan now.
I’m appreciating all the inputs! keep them coming.
---------- Post added at 04:34 PM ---------- Previous post was at 04:02 PM ----------
looks like NYS Mortgage tax only comes into play with new money if done correctly. so if I don’t take any money out it shouldn’t cost me anything as long as it’s a refinance and not a new loan.
good info here:
Fixed vs. ARM is always a gamble…if you got an ARM 5-10 years ago when rates were high and it wasn’t a shady one (probably a long shot), you are winning big right now…my student loans were half fixed and half variable and the variables ended up at 2% right now while the fixed are still 6.8%.
If you’re smart about it and you’re prepared to re-fi if shit hits the fan, go for the ARM if you’ve done the math and it comes out ahead for you.
I’m interested in this as well because by current loan has me paying ~100 more per month because I didn’t come up with 25% down, which has a minimum of 5 years if I stick with this loan. I’m 2 years deep but I’ve paid off more then 25% of my house. I wouldn’t mind a 15 year loan with an low rate that I can easy pay on for the next ~8-10 years. hummm
What are some of the best rates/companies you guys have used/been looking into?
Best bet would be a conventional 15 or 20 year refinance. FHA secured loans carry that 5 yr mandatory PMI even if you are +20% equity after the first year.
15 yr was @ 3.25% and 20 was @ 3.75% when I did mine a few weeks back (both not buying any points)
if you’re going to pay it off in 5-10 years then the penfed 5/5 is a NO BRAINER. they cover all closing costs and the rate will be 3.125 for the first 5 years and no more than 5.125 for the second 5 (probably less unless the economy really picks up.) the fact they eat all closing costs makes you come out ahead for sure unlike other places that will just roll it in. A 5/5 is a lot safer than the more common 5/1 which can adjust every year after year 5.
I’m still shopping around, I’m currently considering the penfed vs. 3.75 fixed for 30 with about $5000 in closing costs (which I can roll in).
google “penfed 5/5” and you’ll find 99% thrilled people and 1% haters.
The only real catch in NY is that by law they can’t pay title insurance for me, so +$500 ~ at closing there.
Will they only refi me if I am above 25% principle paid down? What if I still owe around 90%?
you need 10% equity to house appraisal for the 5/5 if your loan is less than something like 450k
Bump. What’d ya end up doing?
I’m 14 years into my FHA fixed at 6.5% and it’s time to make a move I think.
I’m 3 years into my 30 year fixed 4.5% and I’m thinking about going to the Pen 5/5. I have ~30% paid off so I shouldn’t have a problem switching correct? I’m stuck paying PMI for 5 years on my current loan even though I’m over 20% 