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Old 08-05-2004, 08:12 AM   #4
Kevin72 Kevin72 is offline
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Join Date: Feb 2004
Location: MN
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Re: 3 year arm mortgage anxiety

I'm in the process of refinancing this way as well. I think it's a smart deal if you're moving within 3 years to do the ARM loan. If you choose to stay longer, just refinance again or I think they will lock you into a 15-year loan at a fixed rate if you go past 3 years.
I'm actually doing an "interest-free" loan where I only pay interest and the rate is whatever is the current prime rate (4.25 I believe). It could be a bit risky, but since I'm moving within 3 years, we don't see the rate moving up more than maybe 1 point over that span--plus since I'm only paying the interest anyway, it could move 3 points and I'd still be fine. My payments were basically cut in half. But this is all specuation as I'm no expert, and it's up to Mr. Greenspan anyway.

If you do a 3/1 arm, I think you can "lock in" to a set rate if you pay PMI (prime mortgage insurance)--but that can add another $75 per month (say the house is worth around $200k). Otherwise the payments will fluctuate with whatever the prime rate is. It hasn't been over 5 since 2001, but you can look up the history yourself.

I'm not credit expert, but if you have a few mortgage companies pull your credit, it's no big deal. People realize that you may be shopping around for the best deal, and it's not like you're applying for more credit cards or something.

Good Luck!

Last edited by Kevin72; 08-05-2004 at 08:14 AM.