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Take rate reset deal on 5/5 Penfed ARM rate before feds start raising rates?

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rated:
At 2.75% until 2/1/18.  The current 5/5 ARM is 3.125%.  My reset offer is 0.0625% less than the current rate: 3.07% for the next 69 months (so I'd lose 9 months at 2.75%).

The feds are 99% going to raise the rate tomm and probably at least one more time this year so I am looking at two fed rate raises before my loan resets.  I'm not an expert on how this effects mortgage rates, but it seems rather likely that the 5/5 ARM won't be going below 3% again anytime soon.

I have read the loan is linked to the 5-Year Treasury Constant Maturity Rate + 2%.  I am leaning towards taking the deal as I feel I have more to lose than gain - it's 'only' $50 a month more on my mortgage before tax deduction.

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The rate is 0.06 less than whatever the current promo rate is, so it changes when the promo rate does.  You have until 4... (more)

realjones (Mar. 16, 2017 @ 5:43p) |

Rate is down to 3.0% today.
I have the Rate Alert since mid-Feb when it was 3.0 Was hoping for 2.875 and it went to 3.125... (more)

Amby (Mar. 27, 2017 @ 2:01p) |

I have another 14 months to go.  Anything I can do in the meantime given that I'll be moving out of the house 6 months l... (more)

LukFilm (Mar. 27, 2017 @ 5:06p) |

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rated:
I'd probably do it.

Fed rate moves don't exactly impact the longer term rates that drive mortgages. But chances are you aren't going to see that rate lower than 3% next Feb.

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how did you receive this offer? was it through the mail or email? I have been trying to figure out what I would do. I'm at 2.625%, but mine doesn't reset 2/1/19

I think I would go for it. How do they figure out the payment? Do they reamortize the loan at your current balance and new rate over 27 years?

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NoisyT21 said:   how did you receive this offer? was it through the mail or email? I have been trying to figure out what I would do. I'm at 2.625%, but mine doesn't reset 2/1/19

I think I would go for it. How do they figure out the payment? Do they reamortize the loan at your current balance and new rate over 27 years?


+1 on this. How do we get the offer? Mine is at 2.75 with a 9.1.18 reset. Looking to either lock something or play the ARM game next year.

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Didn't they have a max rate they could increase? If so you might want to hold off.

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umcsom said:   Didn't they have a max rate they could increase? If so you might want to hold off.
  Yep it's 2% max over the life of the loan

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donotdrinkPBR said:   
umcsom said:   Didn't they have a max rate they could increase? If so you might want to hold off.
  Yep it's 2% max over the life of the loan

  The 2% is the max on each 5-year reset - the max for the life of the loan is 5%.  So, if your loan was initially 3%, the max reset in 5-years would be 5%; in 10-years would be 7%; and in 15 years and later would be 8%.  

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realjones said:   At 2.75% until 2/1/18.  The current 5/5 ARM is 3.125%.  My reset offer is 0.0625% less than the current rate: 3.07% for the next 69 months (so I'd lose 9 months at 2.75%).

The feds are 99% going to raise the rate tomm and probably at least one more time this year so I am looking at two fed rate raises before my loan resets.  I'm not an expert on how this effects mortgage rates, but it seems rather likely that the 5/5 ARM won't be going below 3% again anytime soon.

I have read the loan is linked to the 5-Year Treasury Constant Maturity Rate + 2%.  I am leaning towards taking the deal as I feel I have more to lose than gain - it's 'only' $50 a month more on my mortgage before tax deduction.

  Did your offer also require payment of a fee?  I got a similar offer last year about 9-months before my scheduled re-set date.  Fortunately, my rate was lowered enough (3.125% down to 2.4375%) that even after paying the $250 fee I still saved more than that on the 9-months of reduced interest.  Given the current rate is back to 3.125%, my re-set would probably have been higher, giving me more savings on the next 60-months.
Even though the offer would require you to pay a higher rate for the next 9-months, it sounds like you would save enough over the following 60-months to make it worthwhile - especially if you don't have to pay a fee for the change.

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Yeah it's the standard lock in now for $250 they offer. Unfortunately they don't offer it until you are like 9 months to reset - I wanted to reset last month when the rate was under 3%, but couldn't.  Pretty sure it's a standard offer that's good for a little under the current rate up until 46 days before reset.

Only thing that annoys me is that I'd be losing 9 months @ 2.75% or about $500 resetting now vs if I reset on say Dec 20th if the rate still at 3.125% - or even more if the rate does go below that at some point in during this year..

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Working with these ARMs is always a game of "what if".....since rates can move pretty significantly up and down.

But look how much you are still saving compared to that current 30 yr fixed rate.


There is some school of thought that the Fed raising will actually keep long-term bond yields low. Inflation expectations are what really drive the 5 yr and 10 yr bonds.....and a higher Fed fund rate should help keep inflation low. The Fed NOT raising could actually drive long term yields higher....as investors worry about over-heating inflation.

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realjones said:   At 2.75% until 2/1/18.  The current 5/5 ARM is 3.125%.  My reset offer is 0.0625% less than the current rate: 3.07% for the next 69 months (so I'd lose 9 months at 2.75%).

The feds are 99% going to raise the rate tomm and probably at least one more time this year so I am looking at two fed rate raises before my loan resets.  I'm not an expert on how this effects mortgage rates, but it seems rather likely that the 5/5 ARM won't be going below 3% again anytime soon.

I have read the loan is linked to the 5-Year Treasury Constant Maturity Rate + 2%.  I am leaning towards taking the deal as I feel I have more to lose than gain - it's 'only' $50 a month more on my mortgage before tax deduction.

The 5-Year Treasury Constant Maturity is currently 2.13%, meaning that even if rates stay the same, you're looking at a reset of 4.13%.  Breakeven for you would be for the 5 year CMT to drop down to 1.07% (ignoring the 9 months and the fee they charge).  It did drop that low in June of last year but I wouldn't bank on it happening again any time soon barring some sort of economic crisis.

Source: https://www.treasury.gov/resource-center/data-chart-center/inter...

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I'm in your exact same situation - same rate, same reset date. Like yourself I will lose a few months of the 2.75% rate by resetting, and that will cost me $90/month, but I felt it was worth it and pulled the trigger last week. I didn't want to have to worry about the rate inching up over time. Who knows what may happen but personally I feel fine having locked in 3 1/16 until 2023.

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lotusgardener said:   +1 on this. How do we get the offer? Mine is at 2.75 with a 9.1.18 reset. Looking to either lock something or play the ARM game next year.
  
​If you're eligible for the reset, a blue 'RATE RESET' button will appear in your account when you login. I had read this (now archived) thread for information initially: https://www.fatwallet.com/forums/finance/1495440 

​I had been checking basically every day or two for the past couple of months because I was anxious to re-lock before rates increased. The button appeared last week (for my 2/1/2018 reset date) although clicking it didn't actually do anything. I let PenFed know and they told me they'd send the rate reset materials via mail, but then last Friday they called to let me know they had fixed the bug and I should be able to process it online. It took 2 minutes and the new 3 1/16 rate goes into effect 4/1 for my 5/1 payment, which has been re-cast based on my current balance.

​My backup plan was to re-finance to a Navy FCU 5/5 ARM, but I preferred the rate reset route as it was basically no effort; further, although the Navy rate is lower, it required an origination fee and a partial point and the payoff period for that was too long to make it worthwhile.

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realjones said:   At 2.75% until 2/1/18.  The current 5/5 ARM is 3.125%.  My reset offer is 0.0625% less than the current rate: 3.07% for the next 69 months (so I'd lose 9 months at 2.75%).

The feds are 99% going to raise the rate tomm and probably at least one more time this year so I am looking at two fed rate raises before my loan resets.  I'm not an expert on how this effects mortgage rates, but it seems rather likely that the 5/5 ARM won't be going below 3% again anytime soon.

I have read the loan is linked to the 5-Year Treasury Constant Maturity Rate + 2%.  I am leaning towards taking the deal as I feel I have more to lose than gain - it's 'only' $50 a month more on my mortgage before tax deduction.

$50 a month is not lot if you earnings are high

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RiverinSight said:   I'm in your exact same situation - same rate, same reset date. Like yourself I will lose a few months of the 2.75% rate by resetting, and that will cost me $90/month, but I felt it was worth it and pulled the trigger last week. I didn't want to have to worry about the rate inching up over time. Who knows what may happen but personally I feel fine having locked in 3 1/16 until 2023.
  
Ya my estimated reset rate is 4.15%, but the rate reset promo is good until 45 days before.  Since it's based off the current rate I'm looking more at the Penfed 5/5 ARM promo rate vs. the do nothing reset rate.

I think the point about inflation is a good one.  I'll probably end up waiting until the rate goes up to 3.25% and frantically relock wishing I had done it sooner lol.

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I've been watching the 5/5 rate like a hawk too.....I'm currently at 2.5% for another 3 years.....but we are a growing family and our house is too small. We are looking at a significant addition or moving to a larger home.

An addition means I wouldn't be set to refi into a new 5/5 loan until late this year. I'm holding out hope things don't go too crazy over the next 9 months.

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realjones said:   
RiverinSight said:   I'm in your exact same situation - same rate, same reset date. Like yourself I will lose a few months of the 2.75% rate by resetting, and that will cost me $90/month, but I felt it was worth it and pulled the trigger last week. I didn't want to have to worry about the rate inching up over time. Who knows what may happen but personally I feel fine having locked in 3 1/16 until 2023.
  
Ya my estimated reset rate is 4.15%, but the rate reset promo is good until 45 days before.  Since it's based off the current rate I'm looking more at the Penfed 5/5 ARM promo rate vs. the do nothing reset rate.

I think the point about inflation is a good one.  I'll probably end up waiting until the rate goes up to 3.25% and frantically relock wishing I had done it sooner lol.

  Remember, the PenFed current rate for the 5/5 ARM is only loosely based on the underlying rate.   It is also largely based on their desire to attract more new originations or not.   Sometimes it is equal ( or I have even seen higher ) than the reset rate and sometime almost a 0.5 - 1 % lower than the reset rate ( like it is now ).   So it does appear to be a fairly good time to lock in now, as that rate could jump a half percent just based on their desire for new loans without any market or Fed change.

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realjones said:   ...The feds are 99% going to raise the rate tomm...realjones -- do you really think FBI controls monetary policy?

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qcumber98 said:   Too late https://www.washingtonpost.com/news/wonk/wp/2017/03/15/fed-hikes...


Uh no.


Bonds actually rallied today (rates went down), after the Fed announcement.

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rascott said:   Bonds actually rallied today (rates went down), after the Fed announcement.
  
Looks like Penfed decided to keep the rate at 3.125% as the rate page now says "as of March 15th" instead of the "as of March 2nd" it said yesterday.  Two more weeks of rolling the dice here we come!

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Planning ahead for when my rate changes.

When the button shows up and you get an offer, is there any commitment for how long the rate's good for?

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realjones said:   
rascott said:   Bonds actually rallied today (rates went down), after the Fed announcement.
  
Looks like Penfed decided to keep the rate at 3.125% as the rate page now says "as of March 15th" instead of the "as of March 2nd" it said yesterday.  Two more weeks of rolling the dice here we come!

  Just curious, what's the strategy?  Are you hoping that rates drop and they lower the promotional intro rate and therefore your reset offer?  Or is it to try to drag this out as long as you can so that you don't have to pay the differential for the 9 months that you have the lower rate of 2.75%?

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psychoslowmatic said:   When the button shows up and you get an offer, is there any commitment for how long the rate's good for?

The rate is 0.06 less than whatever the current promo rate is, so it changes when the promo rate does.  You have until 45 days I think before reset to agree.

In unexciting news I did end up relocking the rate.  I figure if the promo rate for some reason does go down a lot (like back down to 2.75%) I could consider another refi if low closing costs make it worth it.  Otherwise if the next promo rate shoots up to like 3.37% I have no "protection" against it other than waiting for it to come back down and other ARMs may go up too leaving me with no out and a high rate.

Even if the rate went back down to say 2.875% I'm only saving $50 a month vs the 3.125% and I just feel it's far more likely it goes up vs. down.  I do feel a little salty losing the nine months, but perhaps my future self will thank me.

 

rated:
Rate is down to 3.0% today.
I have the Rate Alert since mid-Feb when it was 3.0 Was hoping for 2.875 and it went to 3.125 instead!
Going to lock it now. will lose 5 months of 2.75->2.93 but not a big deal in larger picture.
5 more years of peace

rated:
I have another 14 months to go.  Anything I can do in the meantime given that I'll be moving out of the house 6 months later?  Should I bother?

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