Should I refinance now or later?

[CountryBoy19]

The advantage of a 15 year fixed, is that you will know what the interest rate is for the entirety of the loan. Interest rates are going to rise, they have to, the fed rate is almost 0% now, so there is only one way to go. Like I said before, the interest expense difference in a fixed vs. ARM will not be that much if you are planning on paying it off in 5-7 years. I'm an accountant, so I like being conservative and knowing what to expect. "Fixed, known and measurable." IF something happens, and interest rates go down again, and you have not or are not close to paying it off, you can re-fi again (only if you will recover the closing costs and then some).

Our posts must have crossed.

I understand the risk. I guess a good thing to do is going to be wait and see what this first year of income does. At that point I should have 20%+ equity in the house and I can refi to a normal 15 year fixed.

Emergency fund sits at 2 months right now, but I plan to take that out to 8 months as soon as the increased income starts rolling in.

 

[jsnowy]

The advantage of a 15 year fixed, is that you will know what the interest rate is for the entirety of the loan. Interest rates are going to rise, they have to, the fed rate is almost 0% now, so there is only one way to go. Like I said before, the interest expense difference in a fixed vs. ARM will not be that much if you are planning on paying it off in 5-7 years. I'm an accountant, so I like being conservative and knowing what to expect. "Fixed, known and measurable." IF something happens, and interest rates go down again, and you have not or are not close to paying it off, you can re-fi again (only if you will recover the closing costs and then some).

I'm totally with ya in the conservative department. It's just too difficult to predict the future.
"Fixed, known and measurable." Love it.

 

[Hotdoger]

i am going along the line of do not refi. pay an extra 50-100 a month along with an extra payment or or two a year. bank the rest. after 12 months pay whatever you have banked towards principle. You will pay the loan off faster, you will cut down the interest rate. another thing to take into account are your other loans,cars & credit cards. the sooner you pay those off also the sooner you can apply more to the house.

Why "bank" any? The sooner it is applied to the mortgage, the sooner the end date.

 

[B27R]

another forum I find really useful for this question is the Fatwallet Finance Forum. Here's a link to a specific thread wherein you will find the lowest rates, fees, and a lot of user experiences posted all in the same thread.

09/28/2010 - Best Mortgage Rates from Big & Reputable Lenders (30year @ 4.5%, 15year @ 4%, ARM's etc)

don't you just love interwebs?

 

[B27R]

ignore the update date @ the beginning of the thread, it's wrong. Just read the post right after the first one, then skip to the last page for recent user experiences.

 

[Leo]

In the 70's a lot of people went with ARM's. That was in a time when the government and the Fed caused a lot of runaway inflation, causing buying power to go down, house payments to go up along with unemployment. I know that some of the ARM's now have caps to prevent the interest rates to go too high. Would that the interest at the top of the cap hurt you?

The last time I lived through this probably 1/2 of everyone I knew had an Adjustable Rate Mortgage. The realtors, the bankers, the mortgage institutions were all really pushing ARM's. I had to shop hard to find a mortgage company who would finance me at a fixed rate because I only had 10% down. When times really got tough, those interest rates shot up and a ton of people lost their homes and had to move into their parents basement. I kept my little house and paid off a 30 year morgage in 11 years by just making extra principle payments whenever I earned extra cash. Because the next 4 homes were purchased with large down payments, I seldom paid more than 4 or 5 years on a mortgage.

It sounds like an above poster has a lot of knowledge about real estate. That is probably a good source of modern information. I am not an expert, but I have practiced a conservative personal financing for years (like what Dave Ramsey now teaches) and I am doing ok, even though I have been in school or giving away most my labors since Jan '07. Do your research, ask a lot of questions and lean toward the safe side of the posiblities, and you'll probably come out ok.