Home­own­ers re­fi­nance, save with ad­justable rate mort­gage

The News-Times (Sunday) - - Real Estate - Dave Stam­bone Dave Stam­bone, To­tal Mort­gage Ser­vices, 203-240-9611, dave@dav­es­tam­bone.com

Mort­gage banker: Dave Stam­bone

Home value: $1,200,000

Prop­erty type: Sin­gle-fam­ily home in West­port

Loan amount: $650,000

Loan terms: Con­ven­tional, 7/1 ARM 4 per­cent no points.

Back­story: A cou­ple was re­ferred to Stam­bone by their fi­nan­cial ad­viser to dis­cuss re­fi­nanc­ing their home. They had put it off for months and the re­cent jump in rates fi­nally in­flu­enced them to take ac­tion.

The cou­ple pur­chased their home sev­eral years ago and had been pay­ing in­ter­est on a higher loan amount. Since then, they had paid down the loan bal­ance sig­nif­i­cantly mak­ing ad­di­tional pay- ments to­ward prin­ci­pal with bonus in­come.

When they closed on the home, both home­own­ers were em­ployed and had a joint in­come. As their life and fam­ily pro­gressed, they made the de­ci­sion for one of them not to re­turn to work.

Based on their new life­style, bud­get and in­come, in­creas­ing their monthly cash flow was im­per­a­tive. They were hop­ing to ob­tain a 30-year fixed Jumbo mort­gage rate around 4 per­cent (a Jumbo mort­gage is a loan bal­ance that ex­ceeds the in­dus­try loan limit, which is cur­rently set at $453,100).

Con­se­quently, rates have re- mained volatile and have been trend­ing north. Strong eco­nomic in­di­ca­tors, such as the low­est unem­ploy­ment rate since 1969, a surg­ing stock mar­ket, a high level of con­sumer con­fi­dence and a re­cov­er­ing hous­ing mar­ket, have all im­pacted rates.

Stam­bone care­fully re­viewed the cou­ple’s sit­u­a­tion and ad­vised that based on their plans and pro­jected time­line, to con­sider a 7/1 ARM (Ad­justable Rate Mort­gage). The 7/1 ARM prod­uct of­fered a 4 per­cent in­ter­est rate, fixed for seven years, on a 360month pay­ment sched­ule. There would be no pre-pay­ment penal­ties so they may con­tinue to make ex­tra pay­ments to­ward prin­ci­pal in or­der to pay the loan off faster.

Fi­nally, the cou­ple freed up more than $1,000 per month by re­fi­nanc­ing to the smaller mort­gage they had paid down. They also saved close to 1 per­cent in in­ter­est com­pared to a 30-year fixed Jumbo rate. This would save ap­prox­i­mately $300 more per month and $25,000 over the next seven years. They closed on the re­fi­nance in less than 30 days and were very pleased with the out­come.

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