Current ARM Mortgage: $650,000
Interest Rate: 7.5% (SOFR + 2% floating rate)
Remaining Term: 23 years
Payment = $4,949
Scenario 1: Refi to 15-yr FRM
15-yr Fixed Mortgage: $650,000
Interest Rate: 5.5%
Term: 15 years
P&I payment: $5,311
Scenario 2: Keep ARM mortgage, rates fall by late 2025
ARM balance (projected): $625,000
Interest Rate (projected): 5.50%
Remaining Term: 22 years
P&I payment: $4,067
If it were me (and I have reasonable, but measured risk tolerance), I would take the floating rating interest rate risk for the next 6-12 months to see if rates come down a bit while throwing extra cash towards paying down principal on the ARM. By November 2025 you could have $625k outstanding on the ARM mortgage with 22 years remaining and a 5.5% floating rate, for a monthly payment of $4,067. With the 15-year FRM, you are locking in a mandatory payment of $5,311 until the loan is repaid.
Locking in 5.5% fixed now, and then expecting to refi again in 6-months seems like a lot of trouble, unless you are super risk averse and need a fixed rate now to sleep well at night, or you think that inflation is here to stay and want to lock in 5.5% now in case lower mortgage rates never materialize.
Interest Rate: 7.5% (SOFR + 2% floating rate)
Remaining Term: 23 years
Payment = $4,949
Scenario 1: Refi to 15-yr FRM
15-yr Fixed Mortgage: $650,000
Interest Rate: 5.5%
Term: 15 years
P&I payment: $5,311
Scenario 2: Keep ARM mortgage, rates fall by late 2025
ARM balance (projected): $625,000
Interest Rate (projected): 5.50%
Remaining Term: 22 years
P&I payment: $4,067
If it were me (and I have reasonable, but measured risk tolerance), I would take the floating rating interest rate risk for the next 6-12 months to see if rates come down a bit while throwing extra cash towards paying down principal on the ARM. By November 2025 you could have $625k outstanding on the ARM mortgage with 22 years remaining and a 5.5% floating rate, for a monthly payment of $4,067. With the 15-year FRM, you are locking in a mandatory payment of $5,311 until the loan is repaid.
Locking in 5.5% fixed now, and then expecting to refi again in 6-months seems like a lot of trouble, unless you are super risk averse and need a fixed rate now to sleep well at night, or you think that inflation is here to stay and want to lock in 5.5% now in case lower mortgage rates never materialize.
Statistics: Posted by sphinx2020 — Sat Aug 31, 2024 8:26 pm — Replies 7 — Views 441