Mortgage Blog

It is the time of the year we will see some refinance activities. The main reason was that we refinanced very low rates 4-5 years ago with the lowest ARM rate 2.25%. And we are waiting for the best chance to refinance to a good rate. 

We came to a scenario like this: if the borrower has 5/1 ARM 2.875% and 5 years later to another 5/1 ARM 2.875% and another 5 years later with the same rate. And if the borrower to make the same payment as 15 yr fixed rate 2.875%, will the borrower payoff the loan at the same schedule ?

The answer is NO. The main reason is the schedule reset. After every refinance , the monthly payment should be reset between the interest and principal payments. If you just have 2.875% for 15 yr fixed, for the 6 year even though the payment might be the same, for the 15 yr fixed program,the interest payment portion percentage will be actually higher. 

Not sure whether I explained clearly. Call or email me if you still get confused. Anyway, this case will not happen anyway. I just to let everyone know the concept of amortization schedule reset.