Do You Know Your Loan?

Feinberg's lunch companion, Dorcas Domenico of Reston, said she "refinanced a couple of times when the rates dropped" two years ago. "We're too boring now for your survey, aren't we?" she said.

Robert Foster, a technology worker who lives in Clifton, refinanced three years ago, when rates sank to 5.25 percent. "I think I was just lucky" to get what ended up being the bottom rate, he said.

Foster said he thought about waiting even longer before locking into a 30-year rate, "but I just couldn't imagine 30-year rates ever going lower."

N.L. Jeffries, a security manager who owns a four-bedroom Colonial on a half-acre in Berryville, also moved to a 30-year loan a couple of years ago "because I know better than to take an ARM," he said. "I wanted my costs to be fixed."

While an ARM might be good for those who can't afford the monthly payment but expect their income to grow or who expect to move before the loan adjusts, Jeffries said, "I think some people just go into it because they want that house, and they don't think of the financial implications until it hits them down the road."

An interest-only mortgage "is a big loser," Jeffries said. "It's like you're running a race but standing still. You're never going to make it to the finish line."

Smucker, the retired banker, though, said she willingly agreed to an interest-only loan for her house because she knew what she was getting into.

She recounted how she decided to put her house payments on her home equity line in 2002 rather than taking out a new mortgage. Though the rate on her loan has shot up to 7.5 percent from 3.75 percent since she signed the original deal, Smucker said her home value has also gone up a lot. And she figured she could take the chance that the rates might not escalate beyond her means because the amount she owed was less than $200,000 and her bank offered a very low interest rate that she could track daily.

If the rate had threatened to climb too high, she said, she would have tried to refinance into a more traditional long-term loan. Since it didn't, she and her husband simply paid the loan down as fast as they could.

"We knew we were going to keep it only about three years more. We wouldn't have done it if we knew we were going to be staying because then you're at the mercy of the rates," she said.

Elena Saxon, a customer-support worker from Loudoun County, said she and her husband took out a seven-year ARM because "we didn't plan to be there for the length of the ARM."

Saxon said she doesn't remember the terms on the loan -- "I did when we did it" -- but quickly added that her husband is responsible for that kind of fine print. He "will definitely keep us on top of all those details."

But, she said, she's "not worried" that she will find herself stuck with too-high payments. Now that there's less than five years left on the loan, "we may stay in the area," Saxon said. "But not in that house" if interest rates jump too high.