Question: I’m looking into refinancing my 15 yr fixed mortgage (9 1/8 %). I can show 20% + equity, etc. We’re only going to be in this house for another 4-5 years tops, so I’m looking at an ARM. I’ve found a 30 year ARM @ 4 7/8, (2% and 6% caps), but haven’t found a 15 year ARM. Do they exist, or do I just take a 30 and make extra payments? (we aren’t super disciplined but could pull it off). If they do exist, could you give me info on the lender/investor?

Answer: If you know you’ll only be there another 4-5 years, you should get a loan with a 5- or 7- or 10-year balloon payment. You’ll get a very good rate and it will be predictable, unlike an ARM.

I don’t like these loans because I like to have options (such as staying longer than 5, 7, or 10 years), even if that’s are only a remote possiblilty. Your instincts about taking an ARM are right on the mark — if you’ll be out of it in just a few years, you can save a lot o’ money with an ARM.

You can ask for a 15-year term from just about any lender… assuming you are talking about a so-called “conforming” size loan. “Conforming” means, among other things, that the loan amount will be $202,300 or less (on a single- family home) — this type of loan allows lenders more flexibility; 15-year ARMs are already on their “menu”.

If, however, you need a “jumbo” (by definition, over $202,300), you’ll have to look around a bit. Still, it should not be very difficult to find.

Lastly, you sure can prepay a 30-year term to whatever term you want, assuming you have (or can develop) the fiscal willpower to do so — and assuming your state disallows prepayment penalties.

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