FatMoneyClip said: In five years, the housing market has dropped and your house is now worth $400k. Do you think a lender would let you ReFi a $480k loan backed up by a house worth $400k?

I can think of another answer to that. If one of the best loan products out there resets to a higher rate than you want to pay, where are you going to refi at a substantially lower rate? If rates go up, they go up, and there's no way around it, outside of a fixed rate loan.

wakebdr said:Has anyone done this yet?

I just bought a house and have locked into this product. I'll post my entire experience here in about a month.

I have done some calculations on the 5/5 ARM vs. a 30 year fixed. I used a modified spreadsheet that someone had posted a few years ago for the old Penfed 2/2 ARM. (Edit: The spreadsheet is now posted at the link below)

Here is the summary:

Assumptions:
- $100,000 loan used for the example
- 30 year fixed rate at 6.5%
- 5/5 rate starts at 5.5%
- 5/5 rate adjusts at worst case 2% every 5 years
- 5/5 rate caps at 10.5% overall (last adjustment only 1%)

The break even point between the 2 loans for total interest paid and remaining principal is 124 months, or a little over 10 years. After that, the 30 year fixed is a better deal. Personally, I have the 2/2 loan that started in December 2004 and has already gone through its first 1% increase. I am considering replacing the 2/2 with this new 5/5 loan.

At the end of 30 years, the total interest paid on both loans is shown below (on top of the original principal):

30 Year Fixed = $127,544.49
5/5 = $168,868.02

Sorry to take up so much space for the numbers below. I can edit and remove them if it clogs up the thread.

Enjoy...

McDealio

Edit: Following jayK's good suggestion, I have removed the amortization tables and posted the spreadsheet using Google docs. This is my first try using it, so hopefully this works:

PenFed 30 Year Fixed vs. 5/5 ARM

Please let me know if I have enabled the rights to edit and view this correctly. Hopefully, my personal email information isn't associated with the .xls. As I said, I haven't used Google docs before so this is new to me.

discoganya said:wakebdr said:Has anyone done this yet?

I just bought a house and have locked into this product. I'll post my entire experience here in about a month.

Hey Discoganya: WHen you went through the on-line application did it reflect the "no closing costs?" I just applied last night and it listed all of the usual fees. I am assuming it was a general process for all of their loan programs and this would be adjusted.

Thanks,
Jeremy

McDealio said:Please let me know if I have enabled the rights to edit and view this correctly. Hopefully, my personal email information isn't associated with the .xls. As I said, I haven't used Google docs before so this is new to me.

McDealio, I too have a 2/2 that started October 2004. My rate then was at 3.5% 2/2 ARM. Can you plz show a comparison why you would want to swich to this 5/5 ARM over the 2/2 ARM?

newyorkminute said:McDealio, I too have a 2/2 that started October 2004. My rate then was at 3.5% 2/2 ARM. Can you plz show a comparison why you would want to swich to this 5/5 ARM over the 2/2 ARM?

I have a 2/2 from around then, although my rate started at 3.625%

Assuming the following for the 2/2:

- $100,000 total balance at month 24
- 2/2 rate starts at 4.625% at month 24
- 2/2 rate adjusts at worst case 1% every 2 years
- 2/2 rate caps at 12.0% overall <- is that true? that offer is no longer listed and I don't recall

And assuming you may refi your 2/2 into a 5/5 at month 24 into your 2/2... (I just couldn't quickly figure it out for month 36) My quickly run numbers show:

After month 48 into your 2/2, your payments would be smaller with the 5/5 if you had refied
After month 204 into your 2/2, your total interest paid is higher than if you had refied with the 5/5
The entire time you are ahead on principal payments with the 2/2

So, if you are going to refi, only do it if you are going to be in the loan past month 204... or 15 more years from now. Unless you are looking for smaller payments... but there must be a better way.

mrblueyzz said:I am looking at the spreadsheet and don't know if I am missing something. The payments in the spreadsheet don't match what shows on the mortgage calculator.


Payment @ 5.5% - 567.79
7.5% - 699.21
9.5% - 840.85
10.5% - 914.74

Thanks,

M


McDealio said:I have done some calculations on the 5/5 ARM vs. a 30 year fixed. I used a modified spreadsheet that someone had posted a few years ago for the old Penfed 2/2 ARM. (Edit: The spreadsheet is now posted at the link below)

Here is the summary:

Assumptions:
- $100,000 loan used for the example
- 30 year fixed rate at 6.5%
- 5/5 rate starts at 5.5%
- 5/5 rate adjusts at worst case 2% every 5 years
- 5/5 rate caps at 10.5% overall (last adjustment only 1%)

The break even point between the 2 loans for total interest paid and remaining principal is 124 months, or a little over 10 years. After that, the 30 year fixed is a better deal. Personally, I have the 2/2 loan that started in December 2004 and has already gone through its first 1% increase. I am considering replacing the 2/2 with this new 5/5 loan.

At the end of 30 years, the total interest paid on both loans is shown below (on top of the original principal):

30 Year Fixed = $127,544.49
5/5 = $168,868.02

Sorry to take up so much space for the numbers below. I can edit and remove them if it clogs up the thread.

Enjoy...

McDealio

Edit: Following jayK's good suggestion, I have removed the amortization tables and posted the spreadsheet using Google docs. This is my first try using it, so hopefully this works:

PenFed 30 Year Fixed vs. 5/5 ARM

Please let me know if I have enabled the rights to edit and view this correctly. Hopefully, my personal email information isn't associated with the .xls. As I said, I haven't used Google docs before so this is new to me.

McDealio is correct. Mrblueyzz, remember to adjust the term when calculating the new PI.
Such as:
100,000.000 5.5% 30Y= 567.79pi
92,460.6034 7.5% 25Y= 683.28pi
84,816.4690 9.5% 20Y= 790.60pi
and on.

My question is about their tying the rate to the 5yr treasury. My google search on the 5 yr treasury shows (a/o 9/12) of 4.1, 4.21 for week ago, and 4.49 for month ago. So, do they reset monthly? weekly? or daily? prior to your lock. If margin is 1%, then shouldn't the rate be 5.21%

I originally applied for the 5/1 ARM on July 28, and locked in at 5.375%. We weren't scheduled to sign until yesterday 9/14. Found out about the 5/5 ARM about a week ago, and asked to switch to that product. They were able to, and even keep the 5.375!

Basically, all communication with the loan processor and their preferred title company was through email, and the whole process went pretty smoothly.

Hey all,

I am a newbie when it comes to finance... So I apologize ahead of time for the questions...

My mother and I own the house (market value around $650K) we are living in now... We are almost done with the initial mortgage... I am looking into getting a new loan for about $40K to pay off my mother's debt (from a failed business venture)...

1.) would this deal be something which works for me?
2.) would it be advisable to refi another $15k for my tuition loan?

Thanks

I just need some directions to make sense of all the info in this thread... where can I read up on all the terms and perhaps can make an informed decision... Thanks again...

dgtop said:ardentazn

I would go with their Home equity loan product. They have 5.99 fixed loan for 20 years. Pay off the existing loan and take out the 40k using that.

thanks.. i didn't see it in their rates page.. but will look again and perhaps call them to see... thanks