Option ARM

I’m thinking about refinancing and wouldn’t mind saving some money before selling my house. If I plan on selling my house in three years, is a Payoption a good idea? If so, would a 1-month be smart? I know I could start at 1% and have the option of paying the minimum (which is set for one year?), but is there any way of guesstimating the amount that my loan would increase? I understand negative am, and I owe 200k on a 300k house. It’s a fairly new home-1 year old-and the area is expanding with new developments. I’m hoping that it’ll increase another 6-8% over the next few years at which time I’ll sell. I’m fine with taking a 100k profit after the sale. Assuming I sell in three years and the house increases 6% each year (value then at approx. 360k) would the loan amount increase by such an amount that I might not be able to walk away with as much money? Basically, I just want an idea of how much my loan would increase by.

What state are you in? When are you looking to refi? Your best deal would be a MTA option Arm. Your safest deal would be a 3yr ARM.

There really is no way to be sure, but if I had to guess…I would say that you would be fine for 2-3 years. You take your interest only payment which the rate would be moving monthly also. Subtract the interested only - minimum payment and that is what you would go back every month on the mortgage. Its just going to depend on current interest rates for the enxt 3 years on how much you would go back. Where are you located?

Hey Menadier. I see you haven’t really gotten an answer yet. I hope to be more helpful for you. If your house is worth 360k when you sell and you pay 6% Realtor Fees (equalling 21,600) you will definitely walk with 100k after the sell. Your best loan is the Option ARM if you are looking at freeing up monthly cashflow. You already understand the basis of the loan. Here are the specific answers to your question.

Your loan cannot increase by more that 15% in the first 5 years.(at least with my company’s version of the option ARM) Assuming you reach the maximum deferral increase, your new loan amount would be 230k. Add that to the 21k in realtor fees and you should walk with 109k after selling your house for 360k.

Now, if you reach the maximum deferral before the 5 years is up, your payment would be converted to an interest only payment at the current interest rate.

If you have further questions please contact me.