is refi into 5 yr ARM with company that wil refi in 5 years at no cost to a fixed a good idea?

Hi Pearl,

I understand your reaching out for help. That is exactly what we need to do when we are faced with a new financing option.

From what you said, I take it you need to refinance. Some things to look at:
1. Rate of the ARM, what is the ARM tied to for periodic adjustments, how often does it adjust. Is there a CAP on the Adjustments.
2. Is there a balloon payment due at the end of the 5 years.
3. Calculate the amount of money the entire process will cost you vs the amount it will cost you if you keep the 4.25% Fixed Loan that you currently have.
4. What kind of interest rate can they offer you in 5 years.
5. Most importantly, you MUST read the ENTIRE contract, often these mortgage brokers have hidden contingencies in their contracts.
6. Remember if they make the loan complicated, you need to look even HARDER at all the fine points BEFORE you sign the contract.

I hope this at least gives you an idea of some of the things that you need to look at when you get involved with mortgage brokers and ARMS.

Say Focused
RER

In my experiance i would not refi with an arms no matter the percent.I have had expperiance with and arms and it was not a good one. It was an intrest bering arms that they said would not adust but did adjust every month and there was suposed to be a baloon payment at the end of the arm loan that i had however the payments got so hi i had to sell and got out of that property just as the housing market was starting to collapse. All i have to say is be careful but i dont recommend any arms loans.

When companies say it is free to refinance, they are basically lying. They have what they call a yield spread. This is where they get you to agree to an interest rate that is .25-.5% higher than you could get straight up. They don't tell you it is a higher interest rate, they just say it is the best you can get. The bank or broker will get paid anywhere from 1-3% of the loan amount for selling that higher rate, depending on how much higher it is. They call these "back-end" points. That higher rate makes up for the closing costs and makes the bank more money. That is why they will pay the points. And you will still likely have title fees as well.

The 5 year arm is tied to the LIBOR index. Yes, I need to refi in 5 years, that's why they have the "pymt protection" program in 5 years to refi at only title cost to me, $400-500 in 5 years at the best rate a 20 or 15 year loan I can pay. I can save up to $7K interest and refi with a lower balance in 5 years at the best rate I can get then, that rate is unknown. The Insiders Cash loan at 10% interest only MUST be refi'ed before another 14 months... thus I base the figures on refi'ing 1 of my 3 rentals into this home owner occupied loan at a 3.5% but $3900 in cost & in 5 years can refi the balance, approx $142-145K at the best fixed 20 year rate I can get. It seems I am about $5K better off in lowering the principal balance & refi'ing that, removing 1 of 3 rentals at 10% interest only bridge loans with Insider's Cash. My cash flow is TIGHT, to say te least, 1 rental in Aabama has been vacant & I've rec'd. nada in cash flow there. Just trying to get good handle on $ mgmt. I refi'ed with this company in 2011 to get out of a GMAC loan where they did not credit my bimonthly pymts until just before the late fees kicked in. Ugh. Your input is graciously accepted!

Tough to offer any options not knowing all the numbers as to market value, equities, cash flows, etc. I started a thread that might give you some insight.

http://www.deangraziosi.com/real-estate-forums/buying-foreclosures-reos-...

I must do it to close the 10% interest only Insider's Cash Loan on the non-performing rental I overpaid for at the Dec. 2012 Buying Summit. I can't sell for what I paid & at 10% it's killing me with no rental income. There is prop. mgmt. but it's just another pay rent or quit for them & more costs to me. I have good equity in my home but am thinking the unknown interest rate by 09/2018 will likely be more than a 4.75% +/- 30 yr. fixed that I can get now. That's cheap financing for the rental, which I am working on turning around. Even with a lower principal balance, about $142-147K by 2018, the interest rate has me a tad worried. There's a 5% cap on the arm but that would be 8.5% worst case, MUCH more than the current fixed I can get. So, I'm thinking I will just go fixed so there's 1 less item to worry over. I still have 2 MORE rentals I overpaid for at the Summit. 1 performing, 1 vacant! I have yet to receive income on the Alabama rental. Had 1 tenant & evicted. Have paid over $5K in interest only note, repairs, repainting, 9 sets of blinds, air conditioner, rekeyed, etc. Thanks for the link. Going to read it later today. Just wanted to say I appreciate your time & input.

I would look for another Property Manager and get a tenant in your property ASAP to use the rent money to keep paying for the loan. I would not refi my own home to pay off my investment properties.

Any time you buy an investment property you have to do your due diligence, including getting comps for area, no matter what sellers are telling you the ROI is, even if you're buying at the Summit.

It makes sense at the absolute highest rate that it can be.

Dean stated CLEARLY that Property Direct "would leave $ on the table" for new investors. The internet was not working, the prop trend software was NOT working, also for a friend of mine from Kansas City & we filed a complaint. Thus, "due diligence" was not able to be done & we were told that we could trust them, I spoke with Lars directly. I think it is unscrupulous for Dean to allow a company to double prices, tell "newbie investors" that there is some left on the table, have no internet or prop trend & then be asked to pay almost DOUBLE what these rentals are worth. I understand what you are saying, however, we TRUSTED Dean, what he said & in the event we could not verify, we went on what HE said. Thus, I am a bit angry. Not only that but it took nearly 4 MONTHS to close & I had to sign a waiver/release for 1 of the 3 properties because I kept finding problems & expenses that Property Direct did not want to cover. I DID confirm with Lars that I stated I was buying 3 CASH FLOWING, RENTED properties. I think that part of the Summit needs MEGA overhaul as many new investors are taken to the proverbial cleaners, trusting what DEAN says there. Hope you understand.

The Insider's Cash bridge loans are only good for up tp 2 years at 10% interest only, still owing the balance of the loan. There is NO WAY, even if the rental were performing, that you can stay with that loan, paying from the rent-IF you get it. I somewhat feel Property Direct was dumping props they wanted to get rid of on us. Sad, but I am going to turn the rentals around with REAL financing, that will eventually cash flow. Sorry but I think the PropertyDirect phase of the Summit is poor. I am entitled to have an opinion & am fairly well versed in education & prior r.e. transactions. Just thought you should know