Options For Cash-out Refinancing: HELOC Vs. Flex ARM Vs. Fixed Rate
Although I thought I was knowledgeable about home financing, with the new terminologies and small footprints, I am getting really confused about which option I should choose. I would appreciate any advise you may provide.
I currenly own my house with a 5/1 ARM at a rate of 5.5%. I have been approved and offered from different sources the following options for refinancing:
1) 1.25% +2.75% margin Flex ARM
2) 90% LTV First Mortage HELOC at prime rate of 4.2%
3) Flex (option) ARM at 1.25% + 2.75% margin.
Now the question I have is HELOC sounds very attractive. However, I am worried as to downsides of HELOC. do you think I should stay with my current 5/1 ARM option (unfortunately a 30 year fixed is not available for my type of property).
Thanks for any help to clarify these for me.
I would suggest canning all three... The best option is to refi into a 30/15 year fixed rate loan. The rates are lowest in decades. Adjustable Rate Mortgages (ARMs) adjust in interest rate (always increasing in rate), Home Equity Lines of Credit (HELOC) also adjust in interest rate (can increase in rate). Why is a 30 year not an option? Leased land, etc. If you are only looking at staying for a couple of years, ARMs are OK, but if you'r e staying for 7+ years why not go with a fixed rate loan.
Thanks Todd.
Reason why fixed rate is not an option is just as you said, property is a co-op on a leased land. Therefore, although it is very valuable due to its location, view, and other amenities, it is still not an option for lenders (at least the ones I have researched for more than a year) as a fixed rate mortgage investment.
That is the reason why I currently have a 5/1 ARM.
Is the prime rate less prone to changes than the other indexes? specifically HELOC is tied to prime versus Flex ARMs tied to 12 month average of monhtly treasury rates. Any more advise based on these information?
Thanks again
the cosi is probably the most stable index. a lot of protfolio lenders utilize this instead of typical prime index
I'd go with a LIBOR before I went with a treasury or prime. COSI was at 1.850 last I checked, however the CODI was at 1.083.