Rate of Our Adjustable Rate Mortgage Will be Adjusted Next Month

When we bought our house nearly five years ago, we chose a 5-year ARM (from Countrywide BTW) over a fixed rate because we didn’t plan to stay in this 3-bedroom townhouse for 5 years. So it made more sense to get an ARM, which was about 1% less than fixed 30-year mortgage, to save some money. Back then, the rate we got for the first 5-year was 4.375%. I wasn’t the lowest, but quite close to the bottom.

Five years later, we are still in the same house, but the fixed rate period of our ARM is about to come to an end. Several friends who bought their houses around the same time as we did recently refinanced to lock in a fixed rate that’s at record low. We, on the other hand, didn’t do anything and don’t plan to do anything because:

1. We still plan to buy a bigger house within a year or two, so it doesn’t make too much sense to refinance and pay the closing cost;
2. With mortgage rate this low, our rate won’t be too high even if it’s adjusted;
3. We have been paying additional principal every month the past few years, so we have saved enough to offset any increase in principal and interest in the short-term should the rate go up.

Now it seems that we made a good decision not to refi, despite getting letters and calls from Countrywide all the time about the expiration of our fixed rate.

Yesterday, another letter, the Home Loan Payment Change Notice, from Countrywide arrived, and, not surprisingly, our new rate, which will take effect on May 1, 2009, will be 3.50%. That’s 0.875% lower than our current rate. As a result, the monthly principal and interest (P&I) payment will be reduced from $848 to $683 Pretty good, isn’t it?

But I am not going to settle with the lowered payment. This morning I called Countrywide to tell them that from next month, I will be paying the same amount of P&I as I am paying now. That’s another $165 a month toward the principal. Hopefully, we can move out of here before next adjustment which is one year away.

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