I’m in an ARM Loan, and I want to get out?

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My wife and I bought our place almost a year ago, and our loan officer glorified ARMs and so on. We decided to go with it, but now our rates are climbing. We’re still able to afford payments, but we could be paying LESS on a 30 year fixed mortgage, instead of this garbage negative amortization loan. What are the steps to do this? I don’t want to just walk into Bank of America and say “I want to refinance with you guys” or hit up Lending Tree or whatever. I guess I’m wondering what good steps I can take to selecting a lender and getting into a loan that’s better for us. Are there any recommended banks, companies, individual lenders, etc? Thanks!

  1. Reply
    Lauren B
    February 3, 2011 at 1:35 pm

    We went through a mortgage broker who found the best loan for our needs.

  2. Reply
    February 3, 2011 at 1:59 pm

    I’m no fan of BofA but they do have a passable reputation. Or get with your local community bank or credit union. Shop around for the best terms and stick with the major local players.

    Obviously you want a fixed rate, fully amortized mortgage. If you consider an ARM, make SURE that it has at least a 5 year lock. 7 or 10 would be better. And FORGET “Option ARMs” — that’s the turkey you’re stuck with now — and their negative amortization.

  3. Reply
    February 3, 2011 at 2:07 pm

    So what’s wrong with shopping around? You would for a car, and this involves a LOT more money

    Ask several institutions and see who gives you the best offer — would probably help if you had a copy of your credit score with you.

    LOTS of places will charge you, or try to get you to subscribe — DON”T go look at


  4. Reply
    February 3, 2011 at 2:55 pm

    Now may be a good time, but if you wait it out another two months or so, rates could go even lower. The federal reserve board just cut rates half a percent and may have to follow this up with a couple of quarter point cuts in the future.

    Bankrate.com has a pretty good site with a lot of information on it regarding different loan types and rates. This site can tell you who has the lowest rates and least closing costs.

  5. Reply
    February 3, 2011 at 3:02 pm

    5 year arm – 10 year – 15 year? It all depends what you have.

    Subprime market is horrible right now, and is only going to get worse in the forseeable future, get out, AS FAST AS YOU CAN!

    The problem with certain banks is that they will have no upfront fees which will save you 1700 bucks at Bank of America (BofA) against comparative banks that charge the 1700 up front.

    Here is where it is tricky… BofA then has your rate locked at 6.7% for the life of the loan, making you think you got a good deal as the fees were waived.

    However the bank that does charge upfront fees usually has their rate somewhere around 6.25%, saving you a lot more than 1700 for the long haul of the loan.

    Point is, read the fine print and make sure you can afford a variable ARM before you go into it or a subprime market.

    Go with a fixed rate, usually only nominally higher than an ARM, and you know what you pay each month.

  6. Reply
    February 3, 2011 at 3:45 pm

    Contact your current lender directly. Sometimes, they will waive the penalty if you are refinancing the loan with them.

  7. Reply
    Jasmine G
    February 3, 2011 at 4:41 pm

    you need a proffesional to evaulate your mortgage and see whats in your best interest. Sometimes, and mainly most of the time, when you refinance now, the saving in interest far surpasses the prepayment penalty. Also, if you wait until december, and because of the payment shock you have any mortgage lates YOU WILL NOT be able to refinance. No lender will touch your loan. And by december, chances are you might kill your equity whatever might be left and you wont be able to refinance.
    im a mortgage proffesional. if you want advice from someone in the business, here it is. let me know if you would like me to clarify things a bit more for you.

  8. Reply
    February 3, 2011 at 5:17 pm

    Just pay your fire insurance.

    I would also have a chat with the loan officer in the parking lot.

  9. Reply
    February 3, 2011 at 5:30 pm

    Refinance is the answer here. If you were to make the $ 3600 payment from May until December, your total payments would equal $ 28,800. And only a portion of that would be tax deductible. If you refinanced now and rolled the the $ 17k into the loan (assuming you have enough equity in your home), the WHOLE $ 17,000 would be tax deductible and you wouldn’t have any additional money coming out of your pocket going towards such a high interest rate. If you refinanced now, the cost of refinancing would be much lower than paying $ 28,800 PLUS the cost of refinancing in December.
    Please feel free to contact me with any further questions! Sorry to hear about your previous loan officer duping you….a neg am, in most cases, is not a suitable loan for a primary residence. They should have known that. Or at least told you what could happen if you take advantage of the initial payment option every month……which is probably what you did and what has caused the loan to recast.

  10. Reply
    Jeremy Pham
    February 3, 2011 at 6:01 pm

    Wow, I would say it’s definitely time to Refinance. What you need to do now is determine if it’s going to be worth it to pay the prepayment penalty, or continue on this path. You are in a negative amortization program so your principal balance is increasing rather than decreasing. If you would like, you can give me a call and we can discuss your situation further and see what options are out there for you and options that would be beneficial to you. Good luck.

    Jeremy Pham
    Mortgage Lending & Investments
    866-966-4224 ext. 7608

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