I refinanced my home at 1.75% two years ago but it's an ARM type of mortgage. Should I refinance now?
This rate is good until July 2018. The lowest rate I could get right now is 3.75%, which is 2 full points higher. I would also have to pay all the costs of refinancing (around $7000). What's your advice?
Answers | 1
February 03, 2017
There are a few things to consider regarding your choices, Juan. How long do you plan to live in the home? (The longer, the more incentive to refinance at some point). How risk tolerant are you? (Do potential rate increases keep you up at night?) What are the adjustment caps on your current ARM? (I'm guessing 1-2% limit on your first rate adjustment and 1% max adjustment after that.) If you have some risk tolerance, I'd be tempted to ride out the ARM until next year. I presume your numbers on the refinance include buying down the rate (as $7000 is far higher than typical refinance closing costs). Keep in mind that the lowest rate isn't necessarily the best option, depending on the costs involved to get that rate. I'd be glad to discuss this further with you. I can be contacted through my profile.
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