Mortgage: ARM adjustment. Worse case?
by Mortgage Rates on Friday, October 15th, 2010 | 3 Comments
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Lay back in the weeds and await developments. LIBOR has crashed; when I wrote a mortgage a few years ago, it was at 5.5%. It is now at 2.5%, which means that (if nothing else changes) my interest rate, at reset, will go DOWN. Your scheme to lay up cash in case the sh-t hits the fan is very wise; you might do well to invest some of that cash in equities, which are still pretty cheap — maybe as much as half of it. There is no way to predict what the debt markets will be in three years; we simply have to hope for the best.
Im assumming that with that kind of mortgage you are making at least 10k per month. As long as you are getting raises of 2.5% every year for the next 3 years, I dont think you will even notice when they payments go to 8%
So now you are paying 4679 P&I at 6.375 right? At 8% thats only 5503 a difference of only 824 dollars. Now assuming you dont make more money by 2011 and you dont put any more into your savings, by 2011 if you have that money in a high interest savings account getting 3%, you will have 40k by 2011 and then use that money for “Adjustment day” and that will keep you going until 2015. Median income goes up about 20% every 7 years, so in 7 years expect that if you are making 10k per month today, you will be making 12k per month then. So i would not really worry if i were you.
You have over thought the whole situation too much entirely. The rates are lower then they have been for quite some time! You should get it over with and refinance the 2 loans into 1 30 year fix rate under 6% and be done with it. I know someone who could go over all your options with you and lay it out and show you what is best for your current situation. You should really shoot him an email and see what options are available to you. Mike@afbankloans.com
Good Luck!!