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I have an Refinance Question,who can answer me?
Q. I have a fixed 11 years left 6.375% loan on my house. No other loans except a 0% credit card with a hefty balance. I am considering (dont laugh) an ARM because the interest rate is so attractive. My plan would be to refinance the ARM after 3 (or 5) years as well as to try to pay off the loan in less than 11 years. I am targeting paying off the loan entirely in 6-9 years which would mean I need to refinance 2-3 times with this approach. Other considerations: I may be moving in the next 1-3 years due to my job although I do not want to move. 52 years old. Any opinions on this idea? We almost went for a second mortgage with no closing costs at 3.9% but it did not cover the balance on the first mortgage.
A. Moving in "1-3 years" may make a refinance at this point an expensive proposition overall, and make a second refinance impossible. You also don't say why you want to refinance (get cash, lower monthly payments, extend payoff period?). I have seen several mortgage companies with 10-year loans in their standard package of offerings lately. Otherwise, you may have to go to a 15-year loan. Your multiple-refinance approach, with its inherent costs at every refinancing, does not appear to be consistent with an early payoff. Besides, the interest rates at any future refinance in the short term you describe would likely be higher than keeping an ARM you would likely get now. Do a bit of math: How much principal will you refinance? What will the payments be for a 10- or 15-year loan that you can get now? Will you roll all the closing costs into the loan, so you don't pay any up front? If so, how much will the payments increase? If you are forced to sell in 1, 2, or 3 years, will the savings in payments make up for the closing costs that you either pay up front or lose in your equity payout when you sell the house? You may find that if you can afford the closing costs up front, you'd be better off putting them into an additional principal payment instead. OR, you may decide to pay down/pay off the "0%" credit card before the interest kicks in ( know of no credit card that has 0 interest ongoing!). Then, make an additional principal payment whenever you can, so you can pay off the mortgage in 6-9 years. Alternatively, you might find a good deal on a 10- or 15-year ARM this time, but don't count on multiple refinances saving you any money.
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