I am in need to refinance. My options are a 5.4% 30yr fixed with 1 point with E-loan OR
an MTA index 30 yr ARM, no points, MTA (1.98) plus margin (2.1), 10 years interest only
no caps anywhere, no teaser starting rate, smaller starting costs (no points). I have 784 FICO
and 60 % LTV. Any suggestions ?? Nedd to payoff credit cards and line of credit and very soon will
need college money for my son.

Altatension:

I am the first to admit that my knowledge of residential financing leaves a lot to be desired. While it seems that Google and other search engines have decided to think of me as an authority on MTA loans, well that is simply not true. Nevertheless, I do have credit experience so let me give you my take.

” 5.4% 30yr fixed with 1 point” I do not know what the rates are today, but last week I checked and they were around 5.3% so that sounds about right. Other than looking at a lender nearby to see if they can beat the rate or the point, this is a competitive loan.

” MTA index 30 yr ARM, no points, MTA (1.98) plus margin (2.1), 10 years interest only” When I started receiving visits from people looking for MTA loans, I decided to take a look at the historical Monthly Treasury Average, and was surprised to find out that it was not too long ago {December 2000} that it was 6%. Think about it……. 4 years ago that base rate stood at 6%, which means you could be paying 8.1% on that loan. This is not meant to scare you, but to make you realize that while the rate is an average of the last twelve months and it is slow to rise, it could and will certainly rise in the near future and for you to take this into account.

The interest only portion is attractive because even if the rates do rise, you will still be paying less for the next ten years. The no caps is scary because in a period of double digit interest rates, you would be paying double digits interest rates. Think it can not happen? Remember the seventies?

In conclusion, I am not a fan of variable rates and I guess it shows


Your credit score is excellent, I say use it to shop around as you will qualify for the best rates anywhere.

If this is your primary residence, I would suggest going with the lowest fixed rate possible. Rates will only be low for so long, and I hate to see a homeowner with an adjustable that will probably only increase. I would also suggest a Home Equity Line of Credit(HELOC)- it can close simultaneously, and then you'd have the option of taking out money as you need it(ie. per year for your son's college, rather than borrowing all the money you think you'll need and paying interest on it immediately) and you'd avoid MI (Mortgage Insurance,) even if the HELOC limit is over 80% of the value of your home. I'm a residential broker in the process of setting up my own company, not doing loans at the moment, but if you'd like any additional advice you can email me at crmetairie@aol.com. Good luck!

forgot to mention, a 30 year fixed rate loan can have an Interest-Only option for 15 years. At the end of 15 years, it will roll over to a 15 year loan with Principal and Interest Payments and still pay out in full. You can always make pre-payments to pay the principal down, but you'll be obligated to the lowest possible payment.