Mortgage Blog

Consistent Long Term Plan/Goal

January 10th, 2016 10:29 PM by Eric Fang

Last week, I got an email from my clients about the request rates of 30 yr fixed for the Jumbo. And he told me that his current loan program is 5/1 ARM 2.5%, and it expires in 3 years. I told him just to hold it.

About 10 years ago, I had one client who took 1 Yr ARM rate with very low rate(Could not remember how low it was). But I could still remember clearly that she would call me every time when the interest rate went up and she wanted to refi, and then she would keep quiet when the rate was down. I knew that she would like to take the chance to hold the lower rates for as long as possible. But I told her that the strategy was not right. The main reason was that it affected her daily life. She had to monitor the rate daily, and she was concerned when the rate was up. It is contrary to the regular thinking. Normally people will consider to refinance when the rate is down, not up, right?

For the above case of the current 5/1 ARM 2.5% rate, we knew that the rate might be higher a few years later when took the rate at the beginning. So basically we were mentally prepared if the Fed increased the rate during the fixed period(in this case, it is the first 5 years). And we would not just think about the refinance when we saw the rate went up. We would ask ourselves the questions like: why we took ARM rate at the beginning? Can we handle the scenario when the rate went up? And what we should do if the actual rate does up?

A lot of my clients who took the ARM rates knows what's going to happen. And they took advantage of the ARM rates for the past 10 years, and they knew even if the ARM rate does up, they can still handle it, either the payment hike is not that much, or they expect the income will increase a lot, or they will have extra stock income etc.
Posted in:General
Posted by Eric Fang on January 10th, 2016 10:29 PM



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