What can I expect when my conventional ARM resets?

[rox63]

I have a conventional 5-year ARM on my condo, and it's due to reset next year. Originally, I was planning on living here for less than 5 years. But now the value of my unit is less than I owe on it, so I can't sell it at the moment. And I can't refinance right now, because I'm not currently working. I can still make my mortgage payments, because I bought well under the price range I was approved for.

My ARM rate reset is supposed to be based on the 1 Yr CMT + 2.75%. The 1 Yr CMT is really low right now. Is it possible that my rate may actually decrease because of this? My current rate is 5.35% until the reset.

[philly_bob]

1. Puzzling facts. Will your new rate be 3.37%.

CMT (Constant Maturity Treasury) rate is 0.62% according to http://www.moneycafe.com/library/cmt.htm

If that's true, is it possible you'll get an ARM of 0.62 + 2.75 = 3.37%?

Maybe ... until next reset. I bet the bank will try to get out of it.

This is an absurd result (but good for you!). A sign that interest rates are being set so low for political reasons that banks aren't willing to lend.

Let us know...

[Celebration]

2. if that is what your note says

They'll have to go by it, I would imagine. Read over your note, and make sure there aren't any caveats or whatever stuck in there. Would it reset every year?

Rereading the note may test your reading comprehension. But I sure wouldn't go by what you were told at the closing.

[rox63]

3. I got this info by reading the note

So my guess that it's correct.

I'm currently going back to school for a mid-life career change, so I'm living off savings and student loans while I do that. I also have a roommate paying me rent to help with expenses. I believe the rate does reset once a year. But I'll be done with school and working in my new field (I hope) before the second reset happens.

[SheilaT]

4. Also, unless you paid

a huge percentage more than your condo is currently worth, you are still doing okay. You are certainly no worse off than someone who has been paying rent all these years. At some point the value of your unit is going to rebound. Meanwhile, you may well benefit from an extremely low interest rate until the next reset. If at all possible you might want to start making extra payments to be credited to the principal only, so as to start actually building equity.

[rox63]

6. Nope, my condo was considered a good deal back in 2005 when I bought it

But the most recent sales of similar units in my complex were for about 15% less than whatI paid for mine, and about 5% less than what I currently owe. A 15% drop in value since the bubble burst is about average for the area where I live. I bought near the height of the bubble (early 2005), so didn't need much of a down payment. It wasn't a sub-prime mortgage, just a very-little-down mortgage, since I had a good job and an excellent FICO score.

[Warpy]

5. ..

[Mind_your_head]

7. My mortgage went DOWN. It reset in January 2009

My mortgage was/is tied to the Libor rate. I stressed about this (my mortgage resetting) from about October 2008 until January 2009 ..... until I saw what that it went down......praise 'g-d' and the "flying spaghetti monster" :eyes:

DU, for all of the good it does, is 'negativity central'.

IMO, you're not screwed, at least not for now......

[rox63]

8. Thank you - That makes me feel a bit better

:hi: