You can’t compare an ARM to a fixed rate guaranteed. You’re taking a risk that rates don’t rise, and you’re being compensated for that risk.
Um when exactly did I do that comparison?
I’m comfortable with an ARM because rates are so not going up in the medium term.
It’s incorrect thinking not to refinance due to being at a point in your current mortgage where you believe since your principal payments have gone up and interest payments down you do not want to start over with a new loan with a term identical to what’s left on the original mortgage.
Example: A $200K 30yr mortgage at 4% starts out with a roughly $954 payment with a $287principal/$666interest breakdown.
At the 10 year mark that $954 payment has a breakdown of $428principal/$525interest and an outstanding principal balance of roughly $157K.
If at that point you started a brand new 20yr mortgage at 4% for the $157k you would again have the $954 payment. And its breakdown would be $428principal/$525interest.
Ah, there’s my mistake - I had assumed that if we started a new 15 or 20 year loan, that the amortization ratio would be similar (though accelerated) to the 30 - that we’d be back to making, relatively, a pittance toward principal each month for several years.
I’ll find some calculators and amortization schedules and educate myself.
Kids these days have it just so easy.
On my first mortgage I got a special honeymoon rate of 16.95%
Could you imagine the mess the world economy would be in now if governments were funding their relief packages at 10-12% or more that applied back then rather the 0.25% they are financing now?
My parents bought a house in ~1980.
My Mom:
Bond rates and bank interest rates were so great back then!
Yeah but your mortgage was like 16%
And here I just got 3.25% in the spring, thinking it couldn’t possibly go lower.
Weird. I don’t see any 7/1 ARM when I put my stuff into RocketMortgage, and one of the industry blurbs about them says they specialize in 8 to 30 year fixed.
It’s a rather smaller loan balance, so maybe RocketMortgage isn’t interested in helping someone squeeze down their monthly interest payment to almost zero. I have 10 years left on a 15-year fixed at 3.25% with 75% LTV and $118k to go.
Um when exactly did I do that comparison?
I’m comfortable with an ARM because rates are so not going up in the medium term.
The comparison was implied. You responded to an OP who asked about rates and used their own 15 year fixed rate as the point of comparison.
You may well turn out to have been right about rates, but there’s still some risk, which is priced in to the market rate.
FWIW, I think your break-even point for the refi is actually sooner than 9 months, because in addition to paying less per month you’re also amortizing more of the loan blaance which each payment. It looks like a very good deal for you (assuming you’re right about rates after the fixed period 
). I assume you must have gotten a break on fees as well as rates - Rocket normally charges $1,295 as an origination/application fee, which doesn’t leave much room for title fees, especially on a loan that size.
Do you mind sharing how you got your foot in the door there? I also have a brokerage with Quicken, but the RocketMortgage website only quotes the 30-year fixed.
Annoyingly, they don’t seem to provide a menu of available products. They just ask a bunch of intrusive personal questions and then show offers based on those. I specified that I wanted to pay off faster than 10 years, having excellent credit and income. But all they managed to do was collect some private information and show me one loan that clearly did not meet any of my stated goals.
Mr. Martian and others, could you share the sites other than BankRate that you’ve used and recommend? I did go to Rocket Mortgage, but I have to create an account to get any rate indications.
Thanks.
I used LendingTree, which then showed me Filo Mortgage as the best rate. I actually already have a mortgage through Quicken Loans (Rocket Mortgage) and expected them to be competitive on a refi, but they weren’t (plus I also had the problem of not being able to tailor the terms to what I wanted).
While LendingTree didn’t have anything better than BankRate, Filo had hands-down the best rates for various terms. Like, makes-me-suspicious better (2.531 30 year, 2.5 20 year, with no lender fees/points). I’m still going to put them at the top of my list.
After having the data boil-and-bubble in my brain for a bit, I think I’m going to do the below; let me know if it seems prima facie crazy:
Refi to a 30 year fixed @ ~2.875 (no points/fees, although I’m sure some costs)
This drops our PI monthly payment by $400; I’ll turn around and add that $400 to my new payment, effectively paying down principal faster than just doing a 20 year, plus having a fallback lower payment if things go pear-shaped (like a lot of big companies, mine is looking to pare expenses, and at my age, getting another comparable job is less-than-likely).
That sounds awesome. But why not go with a 20-yr since you’re already 10 years in with your current 30-year? Slightly lower interest rate, perhaps.
The 20 year rate is 2.875, the same as the 30 year, on most of the comparison sites I’m looking at.
The advantage for me in my particular circumstances is the 20 year PI payment is $350 more than the 30 year. If I voluntarily add that amount (or a little more) to the 30 year payment, I’m actually paying down principal faster (unless I’m missing something), plus have the fallback of a $350 lower payment if I get unemployed/retired.
Ah, got it!
What is the P&I with a 15-year loan at 2.375%?
For me, 1,685. 15 year 2.375 no points.
No thoughts for me?
I’m sorry, I wasn’t clear: the new 30-yr loan would save you $400 a month. How much would a 15-yr loan save you each month?
needscoffee, a 15 year PI payment at 2.625% would be $260 MORE than my current payment, so unless I’m misunderstanding you (again), a 15 year wouldn’t save me anything on a monthly payment basis.
Current: $1,451/mo (at 4.0%)
30y at 2.875: $1,058
20y at 2.875: $1,400
15y at 2.625: $1,715