Tamara Bodrick: Hi! I am Tamara. Today we're discussing how to determine if you should refinance your Adjustable Rate Mortgage. Refinancing maybe an option for you to consider if your loan is adjusting to an interest rate that's higher than the current market rates.
Like many homebuyers, you may have been attracted to the lower initial interest rate of an Adjustable Rate Mortgage (ARM). While Adjustable Rate Mortgages have lower initial interest rates than fixed rate mortgages, the lower interest rate is only for a set period of time.
ARMs have an initial fixed rate period when rates and monthly payments are lower than fixed rate loans. When the fixed rate period ends, the monthly payment adjust based on the type loan you have. Your interest rate and your monthly payment will rise or fall based on the market rate or index. Is refinancing from an ARM to a fixed rate mortgage right for you? An ARM's valuable interest rate can rise based on market or index rates, while the interest rate of a Fixed Rate Mortgage does not change during the length of the loan term.
Refinancing out of an ARM to a Fixed Rate Mortgage may provide stability that you will really appreciate and take comfort in the fact that your monthly payment is going to remain the same. You may gain protection from rising interest rates and future payment increases.
Fixed Rate Loans provide the security of predictable monthly payments. If you do decide to refinance, your financial institution can offer a variety of fixed rate home financing options and the process can be streamlined and convenient.