Posted by CopperheadVA on 11/18/12 7:24am
Msg #443870

Adjustable interest rate loans - they're back!

Of course I know they never left, but I virtually saw none of them these last two years. Lately, I'm seeing more and more of them. Have one for tomorrow morning - initial interest rate is 2.5% fixed for 5 years, and then can adjust 2% per year with a maximum 7.5% interest rate.

Reply by TeriW/CA on 11/18/12 12:20pm
Msg #443876

With rates as low as they are, why in the world would anyone want it to adjust up that high? Because it will adjust up to that max. They may plan on selling before that, but depending on the market, you can't always sell, just because you want to. Not the sharpest shovel in the shed, IMHO, lol...

Reply by sigtogo/OR on 11/18/12 12:27pm
Msg #443878

"because it will adjust up to that max" not til yr 8 tho

and the likelihood of a straight line increase in 3 years is unlikely. these loans are beneficial for the right people but they need to be fully aware of what they are getting into and have weighed the benefit vs drawbacks. I have done two 7/23 loans myself and saved a ton on interest.

Reply by Barb25 on 11/18/12 1:14pm
Msg #443882

Re: "because it will adjust up to that max" not til yr 8 tho

This is so true... In my younger years, I would have insisted on a 15/30 year fixed if I knew I only had 1 year to live. The mentality of feeling secure.

My first adjustable was when I owned a condo in So. FL and hit some hard times and went through a cash out refi. I knew and actually knew when I bought it I was never going to stay there "forever" (unless someone left me lots of money or I won the lottery) so I took an adjustable for 3 years, brought me to 4% (this was in 2002, I think). Even if I stayed a year or so more I was ahead of the game. As long as you have a game plan. That is the key. Life itself is a gamble. It is depending on the odds you wish to play.

Me, now, not so much. LOL.

Reply by sigtogo/OR on 11/18/12 12:20pm
Msg #443877

yes, I've seen a few lately. must need lower rate to qualify

Or perhaps LO is pushing because they can make a bigger fee, and then there is the potential for refi in the future when that 5 years flies by and BO is still in the house.

Reply by Doris_CO on 11/18/12 2:55pm
Msg #443889

I've had several adjustable rate VA loans and I think one FHA adjustable loan. The rate was down to 2.5%, adjusting in 5 years but can only adjust by 1% a year with a max of 7%. It couldn't go below 2%. My guess is they didn't qualify for a low fixed rate and took the adjustable rate in order to get the loan at a payment they could afford.

Reply by Yoli/CA on 11/18/12 3:12pm
Msg #443890

I've seen a few (maybe just 3 or 4) in this past year. They've been for borrowers employed in the computer industry, upper management/engineers, whose jobs have them relocate often.

Reply by Jennifer Jackson on 11/19/12 3:32am
Msg #443956

I have been seeing more of them too. Thought they had died. (lol) But they are baccccckkkkkk.

Reply by CentralNY on 11/19/12 6:37am
Msg #443960

i did hundreds of them in the day and always asked the bo what they planned on doing. ALL of them said refi again in 3 or 5 years, or whatever. i wonder how many were actually able to do that.