I just got a mortgage and now I'm scared about the falling dollar!

[The Night Owl]

Considering the fact that the dollar is falling rapidly, did I screw myself by getting an ARM that is fixed for 5 years?

Here are the specifics of my loan...

My interest rate can change yearly after the first adjustment, which occurs in 5 years. The rate cannot adjust more than 2 percentage points per adjustment and cannot increase more than 6 percentage points over the term of the loan.

I got the loan at 4 7/8, which was very attractive compared to what I could get with a fixed rate. My credit is excellent, but my work situation for the past two years kind of forced me into getting an ARM.

[Worst Username Ever]

1. Nope n/t

[GOPisEvil]

2. Not really...if rates start going back down, I would refinance, though.

ARMs scare the shit out of me. I got a 30-year fixed at 6.125.

[DemocratSinceBirth]

3. yes...

if the dollar fails, inflation will rise, and interest rates will hit the roof....

especially if bush borrows a trillion for his social security privatization scheme....


look at the bright side....


we might get back congress and the white house...

[xray s]

4. Maybe

If you have an option to convert that ARM to fixed I'd go for it. Read this.

http://business.bostonherald.com/businessNews/view.bg?articleid=55356

[Lucky Luciano]

5. Actually a very weak dollar

in conjunction with outrageous deficits can cause some concerns with the buyers of b*sh's (and by proxy - our) debt. The perceived increase in risk will sometimes require higher interest rates to make our debt look more attractive. Interest rate increases are certainly possible. As long as inflation is held in check, the interest rates will also be prevented from going up fast (if at all).

[Gryffindor_Bookworm]

6. Yes. But not why you think.

Friend, interest rates are near a 40-year low. Exactly where do you think they'll adjust to? DOWN?

I would re-fi into a fixed rate ASAP.

[many a good man]

7. Refinance immediately!

Interest rates are going to be several points higher five years from now.

See this column and brace yourself:

http://business.bostonherald.com/businessNews/view.bg?articleid=55356

<snip>
In a nutshell, Roach's argument is that America's record trade deficit means the dollar will keep falling. To keep foreigners buying T-bills and prevent a resulting rise in inflation, Federal Reserve Chairman Alan Greenspan will be forced to raise interest rates further and faster than he wants.

[mcscajun]

8. Look at it this way...

...Interest rates are most surely not going to go further down...not by any significant amount and barring some event I don't think anyone can foresee. So they have only one way To Go...Up!

Only issues are how far and how fast.

If you can lock in a low Fixed Rate, AND you can afford the payments on the new loan...by all means, Refi now.

[bratcatinok]

9. What kind of ARM did you get?

Does it have a conversion feature? Does it have a prepayment feature?

You stated it's fixed for 5 years, what's the cap it can go up or down at the end of the 5 year period? How often does it adjust after the 5 year period?

What interest rate did you close at and how much lower was it than the fixed rate product?

[The Night Owl]

10. 5/1 ARM with 2/6 Caps

My interest rate can change yearly after the first adjustment, which occurs in 5 years. The rate cannot adjust more than 2 percentage points per adjustment and cannot increase more than 6 percentage points over the term of the loan.

I got the loan at 4 7/8, which was very attractive compared to what I could get with a fixed rate. My credit is excellent, but my work situation for the past two years kind of forced me into getting an ARM.

[many a good man]

12. In 8-10 years a loan at under 11% will look good

Or at least normal. Wages always lag behind in inflationary periods but hopefully they'll at least stay close. I think we're entering a period of stagflation like the '70s, only with less inflation.

[bratcatinok]

13. Ok, but what about the conversion feature and the

prepayment feature? Does your ARM have either one of those?

If it has the conversion feature, it's cheaper to go ahead with the ARM and then convert when eligible even if you have to pay a conversion fee (used to be $250.00 a couple of years ago) even if rates do go up. Especially if your ARM has a prepayment penalty feature!

It costs money to refinance and those costs are either:
1. going to be included in the new loan balance.
2. going to be paid for by the new interest rate being higher
3. paid in cash at closing.
or a combination of the three.

Also, since you stated your original reason for being steered towards the ARM was because of the last 2 years employment history, has it been long enough that history would have changed?

Before I retired due to medical reasons, my career was in mortgage banking so that's why I'm asking all of these questions. You probably could find someone who'd refinance you but would it be where they could make more money off of you or would it be because they had your best interests at heart? (cos as I mentioned, it does cost to refinance, one way or the other)

[leftyandproud]

11. ARMS..ugh!

You should have got a 15 year fixed...rates are low now. Best to lock one in before inflation picks up.

[Unstuck In Time]

14. Sit tight and don't panic.

If you've just closed on a loan, I don't imagine you want to rush out and pay closing costs all over again, without having thought it through.

Is there a credit union in your area? I find they're a bit less zealous about sell-sell-selling a "financial product" to anyone who walks through the door. Maybe you could sit down with one of their loan officers, and do the math on refinancing. Maybe do the same at a number of banks/credit unions. Get a few "second opinions."

Also, see if there's a business/financial news station in your area that does call-in segments. You might be able to get some free advice that way. Or look on sites like motleyfool.com.

But above all... take a deep breath, and don't make yourself crazy. There's always an element of "My God, What Have I Done?" involved after major financial transactions. You may decide to refinance or you may not, but it's best to take it slow and steady for the moment. Interest rates are NOT going to rocket up whole points at a time -- at least not in the near term, so you have time to be a bit methodical.

:)