Overall, we have seen interest rates tick down a bit in the last couple months. The Fed, while completing their quantitative easing, has indicated that they see no reason to start raising short term rates. The global economy is struggling and many investors are buying our treasury securities which drives our bond prices higher and yields down. We all know that rates will go up at some point, but right now it appears that we are in for a decent run of low rates. We may even see fixed rates drop below 4%. Let’s keep our fingers crossed.

Now is the perfect time to buy a house or refinance a loan you already have. As we’ve discussed this may be a perfect time to combine your 1st loan with your HELOC to lock down a good fixed rate or hybrid ARM. If you have an ARM that is nearing it’s first adjustment, this might be a great time to re-write that loan into another 5/1 or 7/1 ARM or a 30 year fixed rate.

Mortgage rates won’t stay down forever. Take advantage now.

Many borrowers don’t realize that when they take out a home equity line of credit (HELOC), they are entitled to make interest only payments for just the first 10 years of the loan. At that point, the borrower cannot take any more draws and must begin paying back the balance over 15 years with fully amortizing payments. On a HELOC of $200,000, this can amount to an increase of $1,000 or more per month.

Many took out HELOCs 8-10 years ago so the clock is ticking on the low, interest only payments.  Now might be an ideal time to combine your first loan with the HELOC and lock in a low fixed rate or 5 or 7 year ARM. This way you’ll tied down a rate for a fixed period of time and avoid the payment shock when your HELOC recasts. Give us a call and we’ll do the numbers.

A hybrid ARM is a loan that is fixed for a certain period of time, say, 5, 7 or 10 years. The rate is lower than a fixed rate but there is more stability than an ARM that adjusts every year. In other words it’s a cross between an ARM and a fixed rate. The borrower enjoys a fixed rate for the initial period of 5, 7 or 10 years. Often times, borrowers don’t anticipate staying in a property more than 5-7 years. So, why not take advantage of the monthly savings that are guaranteed for the initial period. There is no reason to pay the “insurance” of a 30 year fixed rate when it is reasonably certain you won’t have that loan for more than 6 or 7 years.

The difference in rate may be as much as 1% or more for a 5/1 ARM. The longer the initial term the higher the rate. But in all cases, hybrid ARMs come with lower rates than fixed rates. Give us a call and we’ll discuss your options.

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180 S. Euclid Ave.
Pasadena, CA 91101