If the Fed Lowers rates again ....

[cobra de capell]

Originally Posted by fsstnotch

I am 95% sure that my rate is only adjustable annually and I know 100% the cap is 9%. I was very hesitant when going this route. Now on the other side of things. I have been contemplating a refinance because I want to remove the house from VA so I can use my VA to buy the new house. So if my rate adjusts annually and it has the 9% cap, should I still refinance to a fixed rate? I have done all the math and if the rate adjusts to the cap every year (1%) and hits the max cap (9%), because I've paid more principal over the first few years, my payments only raise about $20 at the 9% max cap since I would be into the 12th year by the time that rate hit. When I initially agreed to this plan I thought in my mind... the best fixed rate I was offered was 6.5% (I was 21, no cash down). My my mind set was that I would take the hybrid. Pay the 4.5% for 3 years. Then 5.5 for a year, and if it kept rising and hit the 6.5, then I refinance to a fixed rate. So basically, I got a better rate for a few years than I would have gotten initially.

Now, that was smart thinking - apparently your property is at the low end and the 9% cap helps with the downside a few years out. Although, rate continue to be on the low side for non-sub-prime borrowers, so securing a fixed rate loan now is a good idea.