ARM to adjust--should I refinance?

[green_goblin12]

I currently have 2 mortgages on my house:

1: Balance $83,000; 5.375% (30 yr)
2. Balance $19,000; 7.5% (20 yr)

Home worth approx. $120,000.

Both are 7/1 ARM set to adjust in January. Rate cannot go up or down more than 2% each cycle (12 months.) They can go down. Lowest can be 3.375% and 5.5%, respectively. Highest they can go is 11.375% and 13.5%, respectively.

Rate are based on ‘current’ index + 2.75 and 4.75, respectively.

Knowing that the current index will likely be around zero for the next year or two (which of course can change), my payment will likely go down. I think I’d feel better getting in a fixed rate though.

Should I refinance to lock in a rate or let this ride for now? Will I be able to refinance with so little equity in the house?

[BMEPhDinCO]

Since rates are so low right now, if you could refinance into a fixed, that would be the best option.

However, refinancing usually only happens if you have 20% or more equity in the house...you are $6k away from that... Do you have any cash that you can pay down the higher loan by that amount (plus refinance costs) and then get into a fixed rate?

Otherwise, the federal government has announced that rates will remain low through 2012 so you'll have at least one more year after this one to make your decision or save up money to refinance later...

[riverwed070707]

How many years into the loans are you?

[Petunia 100]

Originally Posted by BMEPhDinCO

Since rates are so low right now, if you could refinance into a fixed, that would be the best option.

However, refinancing usually only happens if you have 20% or more equity in the house...you are $6k away from that... Do you have any cash that you can pay down the higher loan by that amount (plus refinance costs) and then get into a fixed rate?

Otherwise, the federal government has announced that rates will remain low through 2012 so you'll have at least one more year after this one to make your decision or save up money to refinance later...

You said everything I wanted to say.

If I were you Riverwed, I would whittle down that second until I was at 80% LTV, then refi to a nice low fixed rate. You do have time, according to the FED.

[riverwed070707]

Originally Posted by Petunia 100

You said everything I wanted to say.

If I were you Riverwed, I would whittle down that second until I was at 80% LTV, then refi to a nice low fixed rate. You do have time, according to the FED.

What about me?

[green_goblin12]

That is good advice, thanks. I'm just guessing on the house value--we recently renovated some and it may be worth more than that, but probably not much. So I may be pretty close to 80%. Fortunately where we live (NE) the housing market has held steady.

We could come up with the difference, but there seems to be no hurry so will likely sit on it for now. But who knows what tomorrow brings.

[Petunia 100]

Originally Posted by riverwed070707

What about me?

Oops, I'm sorry Riverwed. I meant to address the OP, but picked your name instead.

[krantcents]

How long do you plan to stay in the house? There will be a cost to refinancing and how long you stay is a determining factor. Rates are low, so if you stay at least 5 years, it may make sense.