Financial Q&A: Readers' money questions answered

A little patience may help ARM holders who have good credit.

I own a condominium with a $145,806 mortgage at 4.875 percent interest. My five-year adjustable rate mortgage (ARM) expires in January 2008. My current mortgage company offered to waive closing costs if I switch to another five-year ARM at 6.75 percent or a 30-year fixed rate mortgage at6.625 percent. I may not live in my condo for another five years but plan on keeping it as an investment property. I have excellent credit. Which is the better deal?

K.N., Boston

A: Because the fees are waived, Robert Wasilewski, a certified financial planner in Columbia, Md., sees this as basically an interest rate judgment call.

He believes that interest rates, including mortgage rates, are headed lower. Along with others, he thinks that the Federal Reserve will be cutting short-term interest rates between now and year-end, which will push rates lower.

"Thus, with a little patience, I expect that the opportunity to refinance into a 30-year fixed-rate mortgage at closer to 6.25 percent will become available toward year-end," says Mr. Wasilewski.

In the present market, he doubts that shopping around will be beneficial just yet because credit has tightened up so much. Still, Wasilewski advises continuing to follow developments because "excellent credit" borrowers such as you will be the first to be sought after when conditions ease up a bit.

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