How much will my 3 year ARM rate go up?

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I currently have a 3 year ARM mortgage loan on my home. 3 years will be up soon and I’m wondering how I can find out what my new rate will be. It’s currently 4.5%-will it be whatever the bank’s rate for 3 year ARM’s are now or something higher?

I am not sure if I should refinance or not. If I do not, what happens with my current ARM loan when it resets?

Here is my situation:

1st mortgage 5yr arm at 5.125% balance $ 214K
2nd mortgage 30-yr fixed at 7% balance $ 21K

My 5-yr ARM is going to adjust in June 2010.

My approx. LTV (including both loans) is 93%. I got 820 credit score, good salary, no debt or major expenses besides mortgage payments.

Anyone know of lenders (forget the online mortgage quote tools). I believe in the word of mouth advertising… Has anyone gotten a good refinance deal recently – with what lender?

Thank you.
P.S. Correction balance on the 1st mortgage is $ 184K.
Checked my contract. My rate is tied to the 1-yer Libor, the margin is 2.25, loan will adjust once per year. Sounds like I could take some risk and stick with this loan for another year or two? Comments are welcome..

  1. Reply
    February 23, 2011 at 5:47 pm

    you have to review the note on it check out the may just go up to what todays rate is but will continue to go higher if you dont refi soon

  2. Reply
    February 23, 2011 at 5:55 pm

    I would recommend that when it is up, you don’t take out another ARM. You will be better off taking out a fixed rate mortgage, which is running about 6.25% right now.

    You paperwork that you signed at closing will say what it can go up to. It usually has a limit as to how much it can increase each year. Chances are it will go up to close to the 6.25% anyway, so you may as well get a fixed-rate and not have the risk of it going up again next year.

  3. Reply
    First Pacific Financial
    February 23, 2011 at 6:00 pm

    Most standard ARM loan are based on the LIBOR, and unfortunantely that index has only gone up. If you look through your loan documents that you last signed and pull up the adjustable rate (note/rider) it will explain to you what you lifetime cap is (maximum rate your loan can go to) and the maximum percentage that your loan can go up usually every 6 months. I would assume without looking at your paperwork that you can expect your rate to increase hypothetically anywhere between 1.5-2.0% on the 3rd year of your loan. After that point your loan will adjust every 6 months untill it eventually reaches its lifetime cap. I would very strongly recommend that you start working on ways to get out of that loan and get into something with some more security. If you would like any further information please feel free to contact me on my email, and I would be glad to advise you in the right direction. Good luck and good question!

  4. Reply
    February 23, 2011 at 6:45 pm

    Depends on the terms of your Note.

    You need to look up the Index and the Margin.

    The index will be something like the 1 yr T-bill or maybe a 6 mo LIBOR, etc. Once you know the index, you look up the current rate of the index and then add the margin to determine the new rate.

    You will also have rate caps which will be in your Note as well. You should have an Adjustable Rate Rider to the Note that gives all the important terms.

    Be aware too that your rate may start adjusting more often now. Some 3 yr ARM’s adjust once every three years for the term of the loan, while others adjust every month, 6 mos, or yearly after the initial fixed rate period. Again – check your Note.

    Now might be a good time to look into refinancing into a fixed rate. Give your mortgage person a call to discuss your options.

  5. Reply
    February 23, 2011 at 7:43 pm

    Your mortgage contract will spell out exactly what index is used and how many points over that index you will be paying. With today’s low interest you may actually adjust downward. So calculate what the interest rate will be based on today’s rates and you can go from there. Since your loan to value is 93% you may have a hard time refinancing without putting up some cash. Also in order to refinance you may have to pay off the second.

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