Adjustable Rate Mortgage Adjusting DOWN!

[Simplifymylife]

I've been pretty quiet on these forums, but I have read a lot in the last six months since I joined and I thought it was time I shared something from my own experience.

I bought my current home (my third) in June, 2003. I was able to get a 5/1 ARM at 4.375% which was perfect because I planned to be in the house for 5 years or less. The 30 fixed rates were somewhere around 5.5 - 6.0% at the time.

With the 5/1 ARM, my rate was locked in for the first five years. Six years later, I'm still in the house. I would like to sell, but this market has me kind of frozen in place for now.

8/1/2008, was the first opportunity for the rate to adjust. It went up slightly to 4.75%. Still below what I could get for a 30yr fixed rate, so I let it ride.

At the time, I was also unemployed for the 7 months prior, so I wasn't in a position to re-fi, even if I wanted to. Thankfully, I was hired back by my company on 8/4/09 and reinstated back to my original hire date (9/1998). I feel like I'm still recovering from my "time off", but it's getting better every month.

I was nervous about what would happen with the adjustment this coming this August. I had planned to look at a re-fi to a fixed rate, but I just got my letter from the bank, and I was shocked to see that my new interest rate for the next 12 months will be 3.2%!!!!! This is going to result in a savings of roughly $300/month for me! This $300 reduction in my house payment is just the shot in the arm I need right now.

I used a free online mortgage calculator to look at the numbers. It looks like by the time this 3.2% rate expires on 8/1/2010, I will have saved about $17,000 in interest vs the 5.5% fixed rate that I could have been paying since 8/1/03.

I'm going to watch the rates like a hawk as 8/1/2010 aproaches, but for now, I'm letting it ride again.

Is anyone else seeing the rates on their ARM dropping like mine this year?

My 401k may still be in the tank and I can't sell my house, but at least one positive thing has come from this recession (for me anyway).

[WV_mom_of2]

Ours doesn't adjust until 4/2010 so we are waiting to see what happens! Congrats on yours going down. I'm praying ours will too!

[kellieetter]

Ours was good at the time but doesn't adjust for a while, I had to do a loan modification so I am hoping for a low rate like yours!! That is really awesome for you!!!

[Simplifymylife]

Good luck with your loans. Hopefully, the rates will stay down for a while and you can get a letter like mine from your bank.

When I look back at the homes and mortgages that I have had over the years, I think I have done a pretty good job of keeping my emotions out of the transactions (at least on two out of three).

I had a 7/1 ARM on my first house and that worked out well for me too. I sold that house after 3 years and moved across the country for a better job.

I got overly conservative on my second house and locked that one in on a fixed 30 yr mortgage at 6%. Ended up selling that house in less than 5 years and moving into my current home. Looking back, I overpaid on house #2. At the time, my wife and I were about to start a family and I think it was that "nesting" mentality that overcame my math skills. I knew that wasn't going to be our last house.

I regained my senses for purchase #3 and got the loan that fit best with our plans. I only wish we had gotten out of this house before the market fell. We could have been sitting in a paid off house now with what we could have made if we sold while the prices were still on the way up.

I think I may still have one or two houses in my future before I am ready for my "last" house.