Quick Mortgage Ques..ARM Issue

[5inchfatlip]

Can anyone help me find something real quick..have some property need to make a decision on..

Its a Mortgage is adjusting based on " the one year treasury index". From what I know this is pretty low right now, my mortgage guy is out of town for a while..

Index is described as the weekly avg. yield on US Treaus. securities adjusted to a constant maturity of one year, as made available by Fed. Reserve board..

I need a website I can quickly look this figure up? thanks anyone..

 

[jukngene]

Google is your friend: http://www.bankrate.com/rates/interest-rates/1-year-treasury-rate.aspx

 

[5inchfatlip]

thanks just wanted to make sure I had the right figure..

 

[pvmike]

Rates are so low right now it would be a mistake to not get a fixed rate loan.

 

[jond]

Not to butt in, you probably know what you're doing.
But just in case, for 99.999999999999% of people, you should lock into a traditional 15 or 30yr FIXED being we have the lowest rates in US history and they're going to go nowhere but up.

 

[sahtt]

Not to butt in, you probably know what you're doing.
But just in case, for 99.999999999999% of people, you should lock into a traditional 15 or 30yr FIXED being we have the lowest rates in US history and they're going to go nowhere but up.

While I almost agree with you, people have been saying that for over 12 months now and we just hit record lows again. Look up Japan's interest rates.

 

[omega2]

I am currently in the process in buying a house and looked at ARM loans and realized the amount you save isn't too significant when compared to the fixed rate loans. Consequently, I went with the 30yr loan with the 20% down. Personally, I wouldn't worry about the interest rate alone. Due to the high amount of short sales/reo properties, the price of homes in Southern California is all over the place right now, so the price is a big variable.

 

[SilverStone05]

I am currently in the process in buying a house and looked at ARM loans and realized the amount you save isn't too significant when compared to the fixed rate loans.

1.5 points on a mortgage of any amount is serious cash, my friend.

On a 400K mortgage, that represents a savings of about $600 per month or over 7 grand for a year.

Arms aren't for everyone, but they have their place.

 

[pvmike]

A 5/1 ARM is about .75 lower than a 30 right now, so half that.

 

[jond]

While I almost agree with you, people have been saying that for over 12 months now and we just hit record lows again. Look up Japan's interest rates.

I hear you there. But it really comes down to a bet.
Winning that bet means you save a few bucks(not much) a month for 5-7 years.
Losing that bet means you lose your house.

 

[DocL]

The only reason to get into an ARM is if you are 100% sure you can refi for a better rate within the first five years. I did an ARM on my first house purchase because I knew that in five years I'd be able to afford a higher mortgage if I couldn't refi for a better rate. I ended up doing a refi and pulling equity out of my house. I then sold that house 2.5 years later and still walked away with a good chunk of change in my pocket.

An ARM is good for a first time home buyer who is buying within their financial means. Otherwise I'd stay far away from an ARM and go with a 30yr fixed.

 

[W]

An ARM is also good for those that may not be longterm owners.

 

[SilverStone05]

An ARM is also good for those that may not be longterm owners.

This.

 

[jond]

An ARM is also good for those that may not be longterm owners.

With a caveat. An arm FORCES you to not be a longterm owner.
It removes the option.

If the market tanks another 30%, with a 30 year you have the option of changing your mind and staying in your now underwater house with the same payments. With an arm, you have to go bankrupt or cough up a lot of money.

 

[SilverStone05]

With a caveat. An arm FORCES you to not be a longterm owner.
It removes the option.

If the market tanks another 30%, with a 30 year you have the option of changing your mind and staying in your now underwater house with the same payments. With an arm, you have to go bankrupt or cough up a lot of money.

6 month libor looks pretty good right now. :wink:

 

[SilverStone05]

A 5/1 ARM is about .75 lower than a 30 right now, so half that.

You can find ARMs that are a full point below 30/fixed. That's what I've always noticed.

Except when the market freaked and arms were priced higher, as we saw last year.

 

[W]

With a caveat. An arm FORCES you to not be a longterm owner.
It removes the option.

If the market tanks another 30%, with a 30 year you have the option of changing your mind and staying in your now underwater house with the same payments. With an arm, you have to go bankrupt or cough up a lot of money.

I don't agree that an ARM forces you to be a short-term owner. Would you please clarify why? BTW, what do you classify as short-term and long-term?

 

[pvmike]

Depends on the length of the fixed term. If you plan to stay longer than the initial fixed period, then you're gambling with the rate increasing at that time. Given the amount of debt our govt has taken on, we should be seeing inflation in the future = higher rates.

 

[pvmike]

You can find ARMs that are a full point below 30/fixed. That's what I've always noticed.

Except when the market freaked and arms were priced higher, as we saw last year.

That may be true, but I'm going off of current pricing, which is less than a point difference between a 5/1 and 30. Of course YMMV.

I recall when ARMs were higher than fixed loans last year. Can't wait to see what happens when Fannie/Freddie are no longer buying loans.

 

[StmpoRaceProducts]

While I almost agree with you, people have been saying that for over 12 months now and we just hit record lows again. Look up Japan's interest rates.

Boy who cried wolf though.... when there higher... they are gonna be higher for a long time...

Regards

 

[jond]

I don't agree that an ARM forces you to be a short-term owner. Would you please clarify why?

Forces in the sense that you don't have an option but to refinance when the term is up. If you have a 5-1 ARM, you have to refinance in 5 years, right?

A lot of people think houses have another 30-50% to fall.
A lot of people also think interest rates are going to double or triple in the next few years.
If either of those happen, and you have an ARM, you'll most likely go bankrupt.

Maybe I'm wrong?

 

[W]

Forces in the sense that you don't have an option but to refinance when the term is up. If you have a 5-1 ARM, you have to refinance in 5 years, right?

A lot of people think houses have another 30-50% to fall.
A lot of people also think interest rates are going to double or triple in the next few years.
If either of those happen, and you have an ARM, you'll most likely go bankrupt.

Maybe I'm wrong?

With a 5 year ARM, you get a fixed rate for 5 years then the rate starts adjusting afterwards based on some index plus a margin such as LIBOR plus some fixed percentage. It's not uncommon in today's market that the adjusted rate is lower than a 30 year fixed mortgage. On the flip side, I wouldn't be surprised if there are 5 year ARM's where the adjusting rate is based on some index plus margin that effectively forces you to refinance after 5 years.

If house prices fall another 30-50%, forget bankruptcy. It will be a tremendous buying opportunity for those with the financial resources to take advantage.

 

[DocL]

...If house prices fall another 30-50%, forget bankruptcy. It will be a tremendous buying opportunity for those with the financial resources to take advantage.

Wow, do you really expect another bust in the housing market. If the prices in my area fall another 30-50% I'll be able to get into a 6,500sq/ft home for under $500k. The only problem is that the house I built will be worthless.

 

[W]

Wow, do you really expect another bust in the housing market. If the prices in my area fall another 30-50% I'll be able to get into a 6,500sq/ft home for under $500k. The only problem is that the house I built will be worthless.

I don't expect prices in my area of town to fall 30-50%. I just don't see it based on the strong rental market and relative prices. But as you said, if they did fall 30-50%, I'd also be in the market for a much nicer home.

 

[passline]

It is all relative. Unless it is a second home. You don't ever make anything on your primary residence unless you are willing to downgrade like when you get old. An investment home or property, now that's a different animal. Lock in at 30 yr fixed and take your sweet time to pay it off. Buy 2, buy 3, and on.......... :biggrin: As Charlie Gasparino said, it will get worse. This freekin' debt is unreal!!!!