Should I Refinance My Mortgage Now?

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Mortgage Types

Adjustable rate mortgages (ARM) are the type that most financial advisors suggest that homeowners refinance. An adjustable rate mortgage (sometimes called a variable rate mortgage or VRM) is a mortgage that is written with an adjustable rate which will be adjusted at certain intervals due to market conditions and the prime bank rate, usually based on an index that is published in financial dailies like the New York Times.

Depending upon your loan agreement that was signed when you took out your adjustable rate mortgage, your rate might adjust at 3, 5, or 10 year intervals, or even more frequently. What this can mean for the unsuspecting borrower who enters into such agreements is that the payment amount that started out, for instance, at $650 - may within just a few years shoot up to $1100 or even more. The adjustable rate mortgage has caused many homeowners to go into foreclosure, or bankruptcy at the very least. You could be next if your mortgage payment is getting out of hand, or if you are having difficulty meeting other bills as well as your mortgage obligation.

If you have a fixed rate mortgage, as so many people do, you have been making the same payment and will continue to make the same payment until the mortgage is completely paid off. The predictable and set payment is one of the best features of the fixed rate mortgage.

Should I Refinance?

If you are planning on staying in your home for just a short amount of time - as in less than ten years, then, no, you should not refinance your ARM to a fixed rate. Your adjustable rate mortgage probably was introduced at a great rate, and refinancing now will cause you to incur many expenses that are related to refinancing - such as appraisal fees, attorney fees, and more. However, if you plan to be in your home for the long haul, refinancing to get a better rate and predictable monthly payment is a great idea - so, yes, you should get rid of your ARM if these conditions hold true. You can save yourself thousands of dollars over the life of your mortgage by doing so.

The same is true of refinancing from a fixed rate to an adjustable rate mortgage. If you are planning on being in your home less than ten years, it may benefit you more to have an ARM as opposed to a fixed rate. The costs associated with refinancing might be worthwhile, especially if you get a great introductory interest rate.

Where You Can Save Thousands

There are many great financial institutions that work with homeowners online to find the mortgage refinancing product that works for your own particularly unique situation. Contacting an online lender is easy, and they often have savings to offer as opposed to your local bank.