adjustable rate loans
what is better for your adjustable rate mortgage to be based on 6 month libor or 1 year?
Question
Is it better to make larger payments on my principal or...?
I'm sadly inept when it comes to figuring out these things. My 30-year loan is going adjustable in a couple of months (after 7 years fixed at 5%). It terrifies me to think of the unpredictability of an adjustable rate. So I think I should probably refinance the remaining $167k, but my question is this: Assuming I can make higher payments, is it better to: 1) gradually pay down the principal on another 30-year mortgage with an extra $500-800/month, or 2) make the regular payments on a lower rate 15-year mortgage? Let's say the rate difference is one percent. Which depletes the principal faster? Sorry for the stupid question, but I've never been a savvy number person.
1 month ago - 3 answers
Best Answer
Chosen by Asker
There aren't enough details as to what you want to do...move out, stay there longer, etc. so check out the following link and plug your numbers into the amortization calculator: realestate ... Keep in mind that if you refi into a 15 year mortgage, you are locked into the higher payment versus a 30 year mortgage. If an unexpected expense comes up, you still need to make the 15 year payment. Now if you get a 30 year mortgage, you'll have a lower payment, and, if an unexpected expense comes up, you're not in too much of a financial bind. You can also make a 15 year payment if you have extra money but not vice versa with a 15 year mortgage. Doing this doesn't put a strain on your monthly financial obligations - but everyone's situation is different...just something for you to think about.
by Michael
1 month ago
Asker's Rating: 
Other Answers
Pay off principle each month.
by Realtoratheart- 1 month ago
i would go with 15 year because rate is lower and you are more disciplined this way to pay it off faster.
by David Z- 1 month ago