Refinancing Adjustable Rate Mortgages: Get Low Mortgage Rates Locked In
ARM Has Adjusted To A Low Mortgage Rate – Why Refinance?
An Adjustable Rate Mortgage (ARM) is a mortgage rate that is fixed for a set period of time and then will adjust to current mortgage rates periodically.
Many folks chose an ARM in the boom years of 2002 thru 2005. They were popular and made good sense at that time. When the initial rate period ends and the rate starts to fluctuate, that is the time when people are feeling the pressure to make decisions on their current loan if they have not already done so.
My ARM Has Re-Set Lower, So I Don’t Need To Refinance
Mortgage rates have been hovering at historic lows for quite some time now, so many folks who had their initial period of the ARM end found their rate adjusted lower than what it was previously. The conversations with these borrowers are awkward and have been happening at an alarming rate over the last 2 years. The talk goes typically like this:
Consumer: I am on an ARM but my rate just adjusted down to 3.0%.
Loan Officer: That is great news! How long do you see yourself staying in the home?
Consumer: We will be here for some time. No plans on moving anytime soon…
Loan Officer: Great, now is the time to consider locking into a low fixed rate or re-set another ARM for a fixed number of years.
Consumer: Oh, We are all set. Our rate is 3.0% so we don’t really need to do anything right now.
Common Excuses To Not Refinance Your ARM
It is at this point in the conversation that the Loan Officer goes silent or flat out says “OK, good luck”. However, if the Loan Officer does question the consumer at this point this is what they typically hear:
I will look to refinance when the rate start to move up
I am just too busy to even look at it now
I think the rates will be low for awhile so I am going to hold off
Having An ARM Means Periodically Evaluating Your Mortgage
Reviewing your current mortgage rate options is part of the “game” you signed up for when you took on the ARM in the first place. You should periodically evaluate your financial goals, career plans and current mortgage rates to decide what your best option is with your mortgage. You need to look at this as if you were buying insurance. It’s tough to go back in time and say you want to purchase Disability Insurance, after you are already unable to work!
You have already won at the game and you are up at the Blackjack table… Do you want to give your winnings back to the casino?
Eliminate The Fear Factor From Adjustable Rate Mortgages
No one wants to lose butdo you really think you know what is going to happen to interest rates? No – none of us do or we would not need a mortgage in the first place.
Did New York/New Jersey think Hurricane Sandy was going come in October of 2012? The point here is you must prepare yourself for the worst case scenario.
Rates are at historic lows, and there is a good chance you can lock in a 5/1 or 7/1 ARM at a similar rate to what you have now. Or you can choose a fixed rate. Both of these options make more sense than subjecting yourself to market risk on an annual or semi-annual basis. Work with a local mortgage professional who can help you understand how your current loan adjusts so you can make an educated financial decision.