Should I refinance to a 7/1 ARM if I pay approx 40% over the payment every month?

This is a great question and one that deserves to be asked by anyone thinking of ARM's. If you are planning to retire, or live in the house for the rest of your life, an ARM is not a good choice. If you are planning on selling your house in a few years, then its a possibility. If you save yourself 200 a month and your closing cost are only 3k then it will take you about a year to recover the closing costs and to be actually saving money. Its very important to think about all the other costs, break even point, opportunity cost ect. You could also be taking that money and place in a high yield account and make more money if you are not planning on paying off the house. IF you had enough money to throw at the mortgage and you COULD pay it off in less than 7yrs, then take an ARM. If not, stay where you are, your rate is decent. If rates drop significantly look at another 30yr fixed. Thanks

You are asking the right questions as far as arms go. This is a tough one to answer being that you are unsure how long you are going to stay in your home. The rates on arms are going to be a good amount better then what you are paying now, but the flip side is noone has any idea of where rates will be 7 years down the road. You have a solid rate on your 30 yr. so unless you are willing to play that risk then you may benefit best from staying put.Nick FratiniAcre Mortgage 610-344-9988

If you don't plan to either pay off the mortgage or sell the home within 10 years, I would keep the mortgage I have or refinance into a lower term fixed rate. If you think you can pay the home off or will sell it within a 10 year time frame, you may be OK w/ the ARM at 3.25.

The best answer to your question is YES, you should refinance. The next question is do you go to the 7 year or do a 15 year because you can get lower rates and a faster pay off either way you look at it.15 year is a new payment of $1283. Using a rate of 4.125. This could be a better/less risky solution. The 7 Year option leaves you a balance of about 100K at adjustment time. Index+Margin today says your rate would be .79+2.25=3% however, rates are at a low point and people expect them to go higher in the longer term. Finally, before doing anything, look at what your current debts are because it may make sense to reallocate some of that money to paying those things off first then focusing on the mortgage.