Should I salary $500 to fix my mortgage rate for five more years?
I currently have a mortgage that recently go from a fixed rate (for the first five years of the loan) to a variable rate (to be assessed annually for the rest of the 30 year mortgage). The loan goes adjustable for the first time this month. Original interest rate = 4.375%. New rate for this coming year = 5.0%. The bank has offered to fix the rate for 5 more years at 6% for a payment of $500 (we pick up where we left off--not reestablishing 360 more payments, no closing costs, etc.) Is this other?
Two more pieces of information: The interest rate cannot increase by more than 2% this year and next year. And it cannot go up by more than 6% over the natural life of the loan (in other words, it will never be more than 10.375%, and if it ever did, I would obviously refinance.)
But how 'bout this $500 deal? Is it worth it?
Answers:
As a former mortgage broker, I would suggest finding out what it would cost to refi into a fixed for 30 yrs conventional mtg. and what the rate would be paying 0 pts. And compare the transmittal difference between this deal and the refi. The best thing is merely answered by how long you plan on staying in the home and what market values are doing within your area.
$500 seems approaching a small amount for piece of mind. I would do it.
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Two more pieces of information: The interest rate cannot increase by more than 2% this year and next year. And it cannot go up by more than 6% over the natural life of the loan (in other words, it will never be more than 10.375%, and if it ever did, I would obviously refinance.)
But how 'bout this $500 deal? Is it worth it?
Answers:
As a former mortgage broker, I would suggest finding out what it would cost to refi into a fixed for 30 yrs conventional mtg. and what the rate would be paying 0 pts. And compare the transmittal difference between this deal and the refi. The best thing is merely answered by how long you plan on staying in the home and what market values are doing within your area.
$500 seems approaching a small amount for piece of mind. I would do it.
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