Tweet
Bear with me as I fill in some of the convoluted details of my mortgage history.
I have a crazy 40 year ARM that I refinanced into back in the heady days of the housing bubble in the summer of 2007 when I knew next to nothing about personal finance. I did the refinance to get a HELOC to remodel our kitchen. So many poor financial decisions were happening.
When the housing market crashed, my house became worth nothing but my interest rate plummeted too so for a few years we had an interest rate that was under 3% which was lovely. I was underwater on the house back then and couldn't have refinanced if I wanted to but I didn't care because of the low interest rate.
Fast forward to 2017. The HELOC (which we used in its entirety to remodel the kitchen right before the housing market crashed and our HELOC access was abruptly cut off) has been paid off and closed several years ago. What I am left with is the ARM that has 30 years on it. It adjust every year. The current interest rate is 3.625 and has steadily climbed over the past few years. I am in the Seattle area where housing prices have skyrocketed over the past few years so we probably have have about 250-300K in equity just from the insane rise in housing prices. The balance on the mortgage is 287K
I have my personal finances in better shape these days (emergency fund that is probably larger than it needs to be, retirement plan maxed out each year, back door roths for me and my husband, more money placed in a taxable account in each year). There is no prepayment penalty so for the last few years I have made a one time payment equally a year of the principal payment so that this mortgage doesn't really span another 30 years.
My question is this: how high do I let that interest rate get to before it makes sense to refinance into a fixed rate mortgage?
I have a crazy 40 year ARM that I refinanced into back in the heady days of the housing bubble in the summer of 2007 when I knew next to nothing about personal finance. I did the refinance to get a HELOC to remodel our kitchen. So many poor financial decisions were happening.
When the housing market crashed, my house became worth nothing but my interest rate plummeted too so for a few years we had an interest rate that was under 3% which was lovely. I was underwater on the house back then and couldn't have refinanced if I wanted to but I didn't care because of the low interest rate.
Fast forward to 2017. The HELOC (which we used in its entirety to remodel the kitchen right before the housing market crashed and our HELOC access was abruptly cut off) has been paid off and closed several years ago. What I am left with is the ARM that has 30 years on it. It adjust every year. The current interest rate is 3.625 and has steadily climbed over the past few years. I am in the Seattle area where housing prices have skyrocketed over the past few years so we probably have have about 250-300K in equity just from the insane rise in housing prices. The balance on the mortgage is 287K
I have my personal finances in better shape these days (emergency fund that is probably larger than it needs to be, retirement plan maxed out each year, back door roths for me and my husband, more money placed in a taxable account in each year). There is no prepayment penalty so for the last few years I have made a one time payment equally a year of the principal payment so that this mortgage doesn't really span another 30 years.
My question is this: how high do I let that interest rate get to before it makes sense to refinance into a fixed rate mortgage?
Comment