| Arm Need Fixing? |
Evaluate Your ARM
Things to Consider
Check the terms of your current
loan before refinancing from
your old adjustable rate
mortgage into a new fixed rate
mortgage.
The terms of your current loan,
the length of time you plan to
stay in your home, and your
equity position will all affect
your decision to refinance and
the type of loan you opt for.
loan before refinancing from
your old adjustable rate
mortgage into a new fixed rate
mortgage.
The terms of your current loan,
the length of time you plan to
stay in your home, and your
equity position will all affect
your decision to refinance and
the type of loan you opt for.
Stabilize your loan before you lose your equity.
If you took advantage of the lower payment afforded by an option
ARM, consider refinancing into a fully-amortized loan before you
lose too much equity. Otherwise, if rates rise as your equity falls,
you could find yourself with insufficient equity to refinance when
you need to. The loan you select will depend partially on the length
of time you intend to keep your home. The safest loans with the
best rates match the fixed rate period to your time frame. For
example, hybrid ARMs offer fixed rates for 3, 5, 7 and 10 years.
Fixed rate mortgages offer terms of 10 to 50 years. If you can afford
to make a larger payment, look into 15 year fixed rate loans. You
may save hundreds of thousands over the life of the loan, build
equity quickly, and get a lower rate too.
If you took advantage of the lower payment afforded by an option
ARM, consider refinancing into a fully-amortized loan before you
lose too much equity. Otherwise, if rates rise as your equity falls,
you could find yourself with insufficient equity to refinance when
you need to. The loan you select will depend partially on the length
of time you intend to keep your home. The safest loans with the
best rates match the fixed rate period to your time frame. For
example, hybrid ARMs offer fixed rates for 3, 5, 7 and 10 years.
Fixed rate mortgages offer terms of 10 to 50 years. If you can afford
to make a larger payment, look into 15 year fixed rate loans. You
may save hundreds of thousands over the life of the loan, build
equity quickly, and get a lower rate too.
Worried about future rates? Fix & Forget
If equity erosion isn't a concern, but future rates are, get out your
loan documents and take a look. If you aren't planning to remain in
your current home for long, take a good hard look at your mortgage.
If your index is nice and stable, your margin is low, and your caps
will keep your rate in check you might want to stick with your current
mortgage. If your ARM has "ugly potential" and you're going to be
around for a while, find a loan with a rate that will be fixed for as
long as you own your home.
If equity erosion isn't a concern, but future rates are, get out your
loan documents and take a look. If you aren't planning to remain in
your current home for long, take a good hard look at your mortgage.
If your index is nice and stable, your margin is low, and your caps
will keep your rate in check you might want to stick with your current
mortgage. If your ARM has "ugly potential" and you're going to be
around for a while, find a loan with a rate that will be fixed for as
long as you own your home.
Concerned about lack of equity for refinance?
If you're concerned that you lack equity for a refinance, check into
an FHA loan. The agency backs loans with less stringent credit
guidelines and allows for higher loan to value limits. In addition, if
you already have an FHA loan, you may qualify for a "streamline
refinance" with no credit qualifying and no appraisal needed (as
advantage if your credit or property value has declined).
If you're concerned that you lack equity for a refinance, check into
an FHA loan. The agency backs loans with less stringent credit
guidelines and allows for higher loan to value limits. In addition, if
you already have an FHA loan, you may qualify for a "streamline
refinance" with no credit qualifying and no appraisal needed (as
advantage if your credit or property value has declined).
Refinancing to Fix Your ARM