If you believe the media and politicians and you have an Option ARM loan, you are in very deep trouble. PLEASE, don’t fall for that cr–!
If you went into that loan with your eyes wide open and your mortgage broker explained the reasons for doing it and you are paying the minimum payment and investing the difference between it and either the interest only payment or the amortizing payment, you are clearly behaving very competently as it relates to financial planning. In all likelihood, your underlying interest rate is declining significantly in the past year and (depending on your loan margin) most likely is below current market rates. I see nothing in my short term view of the marketplace to change this.
Eventually, depending on whether you had a 110%, 115%, or a 125% principal capped Option ARM; you will lose the minimum payment feature. When that happens it is very likely that the interest only choice will be extremely attractive compared to current market conditions.
We may, in fact, be at a point in time where keeping that loan in place and securing a Home Equity Line Of Credit from a local bank or credit union may be a very interesting strategy. Historically, this was not a wise approach. If that type of loan is available to you now, it is something you should strongly consider. Clearly, you want your local Mortgage Planner to assist you in that analysis.
When your minimum payment feature expires, the Option ARM loan loses a great deal of its attractiveness. At that point, it becomes a cost/benefit analysis versus current market rates and availabilities on an interest only loan.
It is very important that you do everything you can to maximize the ongoing leverage on your home and keep putting that equity to work.
This is certainly a time when working with an experienced and knowledgeable Mortgage Planner is extremely important. Even if you are not considering financing currently, you want to continue annual reviews of your mortgage plan with your local mortgage planner.
If you are in Colorado, I will be happy to assist you. If you are outside of Colorado, I will be happy to refer you to a competent planner in your local area.
