Mortgage Question: Please tell me what you think about this mortgage.?

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I recently applied for this mortgage:
100% loan:

75% of it is a 10 year fixed for 5.37%. After 10 years it becomes an ARM at 1+Prime or something like that.

25% of it is a 7 year fixed for 9.125. After 7 years it becomes an ARM as well.

Both have no prepayment penalties and we can refinance either at any time. We plan on refinancing the second one after a year or so to something a little bit better if possible.

Do you think that this is a good idea with all the talk about how ARM’s are bad?

Thank you for your reply.

5 Comments
  1. Reply
    Strategic Sourcing Expert
    April 29, 2011 at 10:56 pm

    Arms can be scary, but 10 and 7 years before hitting it is very generous. Especially if you have no prepayment penalties. 5.37 sounds super low though, ask them what the actual rate is after fees, points, etc (ask for the true apr) .

  2. Reply
    ddkmom3
    April 29, 2011 at 11:07 pm

    I was in this same situation about 4 years ago. We received 100% loan for our house broke down into two loans similiar to what you have described. I hated the two different loans just too much for me to keep track of.

    This past summer we were able to refinance both mortgages into one that is 5.2 fixed for 30yrs.

    If you can handle to loan payments just keep track of when they will be going to ARM and refinance them into one before that time.

    I also know of people that didn’t refianance and their house payments went from $ 700/mo to over $ 1200 a month in a matter of a couple of months. So be sure to keep track of time and refinance to a fixed rate when possible.

  3. Reply
    Dzo
    April 29, 2011 at 11:40 pm

    Hi,

    Yes certainly it’s a good idea despite the ARM issue. You can get some useful on this from http://mortgage.creditmortgagepro.com . Good luck!

  4. Reply
    John M
    April 29, 2011 at 11:56 pm

    10 and 7 years are pretty good compromises. Just be sure to watch interest rates and refinance when it makes sense. If you don’t know how to do the math, learn the financial functions in Microsoft Excel related to mortgages, Especially the PMT function.

    I can’t speak to the 7 year 9.125, but the 5.37 for 10 years sounds pretty good

  5. Reply
    surfbum68m
    April 30, 2011 at 12:49 am

    Not bad at all. One thing to consider that no one else has brought up is how long do you plan to be in the house? If you think you may move before the fixed period is over then the ARM is really of no concern.

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