In the continuing effort to improve cashflow as income tightens I’m considering refinancing again. I did look into it late last year trying to use my VA benefits (read, no closing costs) but ran into an issue with wife’s credit report and they said there was nothing they could do. I alos applied with my credit union although I can’t remember if I put the wife on that one or not (think I did) and it was pre-approved but never went through with it because of the closing costs and points involved.
Round 2 Application
So I just applied again with the credit union, just me this time, and it spit out the different program options for me (not approved yet).
If I stayed with a traditional 30 year fixed I would have had 6 points and ended up with closing costs of $17,000, OUCH! I assume I could have rolled that into the loan but payments with taxes and insurance would have been close to where I am now, maybe saving $200 a month.
Next there where the ARM Loans, 7/1, 5/1 and 3/1. These basically start out at a very low rate and then after the first term of 7, 5 or 3 years the rate would be re-evaluated each year. Increases in the rates to never exceed 2% and lifetime to not exceed 6%
Where I’m at and Where to Go
Currently I am in a fixed loan at 6% with P&I payments at $1430. Dont have a traditional impound account and pay the insurance and taxes on my own. These equate to about another $350 a month.
If I go with with the 5/1 the rate starts at 2.5% making the P/I payment of about $980 which by the way I love or I could go for the 7/1 with rate of 2.75% and payment just a bit more at $1020. Either one would be great with a saving of at least $400 a month, just have to decide when I want that first rate jump.
We all know that rates are at an all time low, and realistically the will be going up. But… How high 5-7 years from now? With the cap the max it could go is 8.75% in 10 years (putting me in a worse position than now) but I can always refinance again right?
I know it’s best to lock in a low rate for the long haul, but I have to also look at realities of my current situation. I need to improve cashflow so that I stop using credit (another post for another day) and doing the APR loan will improve the current situation.
Well I’m at the doctors and he just came in so those are my thoughts for now. Guess I just wait for an answer on the application and see where we go from here.
What are your thoughts? I’m curious on what you would do or have done.