We purchased our home a little over four years ago. Our mortgage was from our credit union, and it was a 2-year ARM that could go up a maximum of 1% every two years. The starting rate was 3.75%, which was well below 30-year fixed rates at the time. Also, choosing this mortgage allowed us to skip the PMI since we only wanted to put down 10%. It was a great option at the time.
Fast forward to 2008, and our rate adjusted to 5.75%, still a very reasonable rate. However, our home value has increased substantially, and we're below the 80% LTV threshold for PMI (closer to 60%). This week, I was able to lock in a 30-year rate of 5.5%. We're not planning on moving for at least another 8-10 years, and I wanted to get a fixed rate while rates are still low. Will rates go even lower? We'll see, and if they drop like a rock, we'll refinance again.
We will continue to pay the amount of our current payment in order to reduce the loan payoff term.
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