Possibility of refinance to 30 year fixed loan at under 6%

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Possibility of refinance to 30 year fixed loan at under 6%

Li Ou
SF Bay Area, CA · Member since 2022 · 17 posts · 6 votes

I bought my home 2 years ago with a 10/1 ARM in the San Francisco Bay Area, Pacifica to be exact, rate for the first 10 years is fixed at 5.875%. Thinking of refinance it to a 30 year fixed just don't wanna take the risk of potentially higher payment after 10 years. LTV less than 60%, credit score 750. Any chance there's lender out there can pull off a refinance loan at a rate under 6%? Thanks in advance

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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
1y
Quote from @Li Ou:

I bought my home 2 years ago with a 10/1 ARM in the San Francisco Bay Area, Pacifica to be exact, rate for the first 10 years is fixed at 5.875%. Thinking of refinance it to a 30 year fixed just don't wanna take the risk of potentially higher payment after 10 years. LTV less than 60%, credit score 750. Any chance there's lender out there can pull off a refinance loan at a rate under 6%? Thanks in advance


personally I would still wait and hold out. you have 8 years until you have to refinance and to get under 6 you may have to pay several points - it is highly unlikely we will see rates significantly higher over the next 2-4 years and potential that they come down slightly, the economy will eventually tank which will drop rates - so I would still hold out a little longer. Also with the LTV you have it should not be a problem to refinance at any time in the future.

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  • Patrick Roberts
    Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes
    1y

    Unlikely without paying a ton in points. 30yr FRM is mid to high 6s right now.

    0Reply
    • Li Ou
      OP
      SF Bay Area, CA · Member since 2022 · 17 posts · 6 votes
      1y
      Quote from @Patrick Roberts:

      Unlikely without paying a ton in points. 30yr FRM is mid to high 6s right now.


      As far as I remember, one point can bring down the rate by .25%, and most banks won’t let you buy more than 2 points. Is that the case? Correct me if I’m wrong 

      0Reply
    • Patrick Roberts
      Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes
      1y
      Quote from @Li Ou:
      Quote from @Patrick Roberts:

      Unlikely without paying a ton in points. 30yr FRM is mid to high 6s right now.


      As far as I remember, one point can bring down the rate by .25%, and most banks won’t let you buy more than 2 points. Is that the case? Correct me if I’m wrong 


       The rate reduction per point of buydown is not fixed, nor is it linear. It varies a lot. Typically, buydowns of more than 2 points arent a great idea, but are possible. 

      You'd be best served by working with your lender to set up a refi file so that it's ready to go if an opportunity arises. This will give you some insight on what to expect as far as costs, breakevens (if any), and market movements. The ten yr has been super volatile the past year, so it's very possible that we get a brief but sharp drop at some point that you can take advantage of. 

      Also, I wouldnt be in a hurry to refi just to get rid of the ARM. You've got a few more years before it will become a pressing matter. Not much has changed in the last two years since youve gotten it, so the reason you got it in the first place likely still applies.

      0Reply
    • Erik EstradaBusiness Member
      Lender · Member since 2022 · 6k+ posts · 1k+ votes
      1y
      Quote from @Li Ou:
      Quote from @Patrick Roberts:

      Unlikely without paying a ton in points. 30yr FRM is mid to high 6s right now.


      As far as I remember, one point can bring down the rate by .25%, and most banks won’t let you buy more than 2 points. Is that the case? Correct me if I’m wrong 


      This is not always the case. Buy downs will depend on the lender's floor rate, LLPAs and, spread. If this is an owner occupied loan, you might achieve this on an FHA and MAYBE a conventional loan if you shorten the loan term to 15 - 10 year loan.

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  • Elias HalvorsonBusiness Member
    HI · Member since 2024 · 225 posts · 130 votes
    1y

    Yeah, youd be looking around 3 pts for 5.875% right now. I agree with the sentiment to not be in a rush for the refi - with the economy facing numerous headwinds, I think there will be opportunities in the future. 

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    1y
    Quote from @Li Ou:

    I bought my home 2 years ago with a 10/1 ARM in the San Francisco Bay Area, Pacifica to be exact, rate for the first 10 years is fixed at 5.875%. Thinking of refinance it to a 30 year fixed just don't wanna take the risk of potentially higher payment after 10 years. LTV less than 60%, credit score 750. Any chance there's lender out there can pull off a refinance loan at a rate under 6%? Thanks in advance


    personally I would still wait and hold out. you have 8 years until you have to refinance and to get under 6 you may have to pay several points - it is highly unlikely we will see rates significantly higher over the next 2-4 years and potential that they come down slightly, the economy will eventually tank which will drop rates - so I would still hold out a little longer. Also with the LTV you have it should not be a problem to refinance at any time in the future.

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    2Reply
  • Li Ou
    OP
    SF Bay Area, CA · Member since 2022 · 17 posts · 6 votes
    1y

    Thanks for all your guys' input, it sounds promising to get a lower rate in the future. I'll hold on to it for longer 

    0Reply
  • David Bilandzija
    Lender · Venice, CA · Member since 2021 · 189 posts · 132 votes
    1y

    Hi Li,

    Another factor to be mindful of is the loan balance, as it affects interest rate.  High balance loans will carry a slightly higher rate.

    Conforming Loan Balances in Contra Costa County:

    • Low-Balance:
      • For a 1-unit property, the limit is $806,500
    • High-Balance:
      • For a 1-unit property, the limit is $1,209,750
    0Reply
  • Wilson Lau
    Real Estate Agent · San Jose, CA · Member since 2023 · 182 posts · 104 votes
    1y

    Most of my clients were getting ~6.5%. One was able to get 6.1% because of a special program.

    0Reply
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