Re: Mortgage refinancing?

On Feb 27, 11:40 am, sheetsofsound <jackzuc...@xxxxxxxxx> wrote:

We're capped at a maximum of 2 points a year for the first 3 years
(2013-2015). So worst case, we'd be at 11.125.

Oh, if that's not going to kill you and you aren't going to lose sleep
over the trillions the U.S. (and other global governments are
spending), then that's fine. I just personally prefer fixed rates in
general so I know my payments won't go up for any reason.

However, given a current mortgage of about $80k and a 5.125% interest
rate it may be smarter to just pay an extra $200-$300 / month. That's
the advice I'm getting and it makes sense looking at the amortization
charts. You think that makes sense? I'd like to refinance for 15 years
but with the current interest rate offerings and closing costs, it
seems like a more expensive route.

I don't know, you can do a simple scenario analysis. You can just
compare what the total all-in cost is going to be for you over the
next 15 years (take the new rate, and then spread the cost of
refinancing over the 15 years). It will be higher than you current
monthly payment, but then you would know what the break even point
would be.

If rates stay level or go down, you would be better off now in an ARM,
but if rates go up, you would be better off with a fixed, even after
the cost ABOVE A CERTAIN LEVEL. At an new ARM rate of xx%, you would
have been better off to refinance into a fixed.

Then the decision would be, "Do I think the floating rate mortgage is
going to get up there?".

So it's a relatively simple decision. If this so-called 'break-even'
ARM level is much, much higher than now, then of course it may not be
worth refinancing, for example...

Anyway, it's certainly a tough question and there is no right answer
(with the information we now have. There will be a right answer in
hindsight, of course...).

The market can stabilize and things can go back to normal within the
next couple of years (although probably not boom times), or some think
we may fall into the 1970s like stagflation with high inflation (due
to government spending).

And yet others think we are headed the way of Japan, in which case low
interest rates will be here for a very long time. The 1930s Great
Depression scenario would also call for an extended period of low
interest rates. This would be the deflationary collapse scenario.

But you know what? Who the hell knows what is going to happen?
Nobody really knows.

So it's what you are going to be comfortable with, and what let's you
sleep at night that is going to be the most important thing to think
about.

Ken
.

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