I was looking at PenFed rates and saw a 5yr adjustable mortgage at 2.75% for the first 5 years then adjustable by 2% a year.They mention "No Origination Fee – No Points" but I'm assuming there must be other fees such as a home appraisal. Are there any good ways to estimate how much they generally run?On a side note how do they advertise a 2.75% rate but an APR of 2.67%? Its been a while since I looked at the math of interest rates but I had always assumed the APR would be no lower than the interest rate. Are they including some kind of reimbursements?I'm torn between the safety of a fixed rate versus a lower adjustable rate. Mine is currently 3.99%, 30 yrs that I got a year ago. I really don't want to stay in this area (MD) long term but that will depend on jobs. I'll probably just let things go for a while and figure out the job thing first since I doubt the rates will go up for a while but lowering my payments by $200+ per month is tempting.ThanksRich
We refi'ed with PenFed two years ago. I don't recall the closing costs of the top of my head but they were minimal. I can't remember if we paid the appraisal fee but we had to pay for title insurance, state filing fee, etc. If you give them a call, they should be able to give you an idea of what to expect. If your payment will really go down that much, you should definitely refi because the breakeven point should be pretty soon.-Steph
We just refi'd with PenFed. Originally we thought we'd need an appraisal, but it turned out they decided we had enough equity that we didn't need one. On the good faith estimate, the appraisal fee was listed at $300, and was an item that could not be increased by more than 10%. (ie, could have been a max of $330.) The GFE was from July, we closed in September.And we really did have no closing costs. There is a clause that if we refi out of this loan in the next 24 months, we are responsible for the closing costs that PenFed paid (~$275 in our case), but that was the only wrinkle.We're quite happy with them so far.~mary anna
On a side note how do they advertise a 2.75% rate but an APR of 2.67%?My understanding (could be wrong) is they calculate the APR by using today's interest rates for the adjustment period at year 5. If the ARM adjustment is based on the 1YR LIBOR + a margin, and if the adjustment was calculated on today's rates, the rate would adjust lower than the initial rate provided of 2.75%. This results in an APR lower than the initial rate.
I refinanced with them with this loan about a year ago and they paid for pretty much everything including the apraisal. As I recall there was about $200 in costs that they didn't pay but I don't recall just what these were. It might have been some sort of local tax.On another message board this loan is often mentioned and one of the things people have found is that this loan is very popular so it is taking a bit longer to refinance through them than some other lenders but they give a 90 day lock so this is not a big problem. I just checked their web site and it said;"*5/5 Adjustable Rate Mortgage (ARM) Promotion: PenFed will pay closing costs up to $10,000 to include: appraisal fee, tax service fee, CLO access fee, title fees, transfer tax fees, credit report fee, flood cert fee, recording fee, survey if required and work verification fee. This does not include: escrow, interest, homeowner’s insurance or owner’s title insurance"https://www.penfed.org/55-Adjustable-Rate-Mortgage/
One more comment;...I'm torn between the safety of a fixed rate versus a lower adjustable rate. Mine is currently 3.99%, 30 yrs that I got a year ago. I really don't want to stay in this area (MD) long term but that will depend on jobs. You can make a spreadsheet but since the rate can increase by a maximum of 2% in five years then be locked for five more years then;1) In year 1 to 5 you would have 2.75% instead of 3.99% and improvement of 1.24%2) In year 6 to 10 you would have at worst 4.75% instead of 3.99% which is 0.76% worse.Even without doing the math you can see that if you move within ten years the PenFed loan is a lot better overall.If you refinance and keep making you the same mortgage payment each month as with your old mortage then by the time rate resets again in ten years then the balance would be much lower which would push the breakeven date out even farther.In my case I was able to lower my interest rate by 1% and plan to have the loan paid off in 7 or 8 years so the numbers worked for me.
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