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Timing a refi before rate readjusts

Borrower fears payments will skyrocket in 2011

DEAR BENNY: I have a hybrid mortgage that is fixed for the first five years at 4.25 percent, and is tied to U.S. Treasury securities. The loan document notes that the index value is 2.1 and the margin is 2.75. The first change date on the loan is Dec. 1, 2011. My loan documents say that on the first change date my interest rate could be as high as 9.25 percent or as low as 2.75 percent, with no more than a 2 percent increase in any given year thereafter. Given the current fixed interest rates, is it advisable for me to refinance the loan now or continue to take advantage of the low rate I am paying for another year? What is the likelihood that the "index" could reach 6.5 percent in a year raising my interest rate to 9.25 percent? --Molda DEAR MOLDA: That used to be a tough question, but with mortgage interest rates currently at the lowest in history, I think there is only one answer: refinance. You may actually be able to get a new rate similar to your current ...

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