Mortgage Blog

One net friend from WXC(www.wenxuecity.com/tzlc) asked about my opinion
of the rate trend of 30 yr fixed and ARm rates.

Here is the Conversation:
Q:My loan amount is 400k. I try to do 4.5%, 30 year fix, no point
no fee re-fi for my main home.  My broker said currently it is around
4.75%. Do you think it will touch 4.5% in next few weeks?

A:It's very hard to get 4.5%. We got the rate of 4.625% Nov-Dec of 2009.
Unless the economy is getting much worse in Europe and Japan, it will be
very hard to get 4.5%; 4.625% is possible with LTV<=4.625%. But the locking
period may be short. There are a lot of interests for this 4.625% rate.

And you can take the risk, why don't you try 7/1ARM, you may get the rate of
3.5% to 3.75% soon(if impound, LTV<=60%).

Q: Can I understand this way, if I can get a program for 4.5%, 30 year fix,
we shall do it even impound, 3 year pre-pay penalty (because there is absoluatly
no hope for 4.5% with normal program) or pay a few hundread $ fee?

Many people, even I, are worry about ARM program now in case they are unable
to re-fi when the term is up. What do you think?

A: Yes, it's possible to get 4.5% if you are willing to pay some fees or
with three year pre-payment Penalty.

Here is my opinion about the ARM Rate.
1)The economy cycle is shorter now.
Every 7-10 years will have a slow down or recission.
If that's the case, then why worry? There is some risk if my assumption
was wrong.

2)It depends on how soon you can lower the balance, if you can pay down
the balance as low as 200k - 300k within 7 years, then even the ARM rate
is 6.5%; your isk is still minimum. And I did not see conforming ARM of
6.5% in the past 8 years.

3)If the HELOC rate is not that high in the future, you can use HELOC to
re-balance your loan. I have a HELOC of 2.25% now. Even if the Fed increase
the Fed Rate for another 4% to 4.25%; my heloc is 6.5%. That may be the
highest Fed rate for the past 10 years. And I can handle that risk.
For every other person, you should find a program to meet your needs.