Neighbor News
Homeowners Refinance, Save with Adjustable Rate Mortgage
Ask the Expert! series from the Ridgefield Chamber of Commerce
A Snapshot Study from Dave Stambone- VP/Mortgage Banker
A couple was referred to Stambone by their Financial Advisor to discuss refinancing their home. They had put it off for months but the recent jump in rates finally influenced them to take action.
The couple purchased their home several years ago and had been paying interest on a higher loan amount. Since then, they had paid down the loan balance significantly making additional payments towards principal with bonus income. Both homeowners were employed and had a joint income when they first closed on the home. As their life and family progressed, they made the decision for one of them not to return to work.
THE NEED: Based on their new lifestyle, budget, and income, increasing their monthly cash flow was imperative.
THE FACTORS: They were hoping to obtain a 30YR FX Jumbo mortgage rate around 4% (a Jumbo mortgage is a loan balance that exceeds the industry loan limit which is currently set at $484,000).
Consequently, rates have remained volatile and have been trending north. Strong economic indicators such as an all-time low unemployment rate, a surging stock market, a high level of consumer confidence, and recovering housing market, have all impacted rates.
THE PLAN: Stambone carefully reviewed the couple’s situation and advised that based on their plans and projected timeline, to consider a 7/1 ARM (Adjustable Rate Mortgage). The 7/1 ARM product offered a 4.00% interest rate, fixed for seven years, on a 360 month payment schedule. There would be no pre-payment penalties so they may continue to make extra payments towards principal in order to pay the loan off faster.
THE SOLUTION: The couple freed up over $1000 per month refinancing to the smaller mortgage they had paid down. They also saved close to one percent in interest compared to a 30YR FX jumbo rate. This would save approximately $300 more per month and $25,000 over the next seven years. They closed on the refinance in less than 30 days and were very pleased with the outcome.
What’s your question? #ASK THE EXPERT!
