Confused About Your Adjustable Rate Mortgage? Get Out Now By Refinancing

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Ease Your Financial Burden

If you took out the mortgage on your home during the period from 2003 through 2006, or earlier in some instances, chances are you have an adjustable rate mortgage that is getting out of hand and burdening you financially. The interest rates on most mortgages written during those years were below six percent, so borrowers were snapping up loans at never before seen rates during a time when it was easy to break into the housing market and become a homeowner.

Unfortunately, you, like many others who were sucked into these adjustable rate mortgages, may not have understood the loan product that you were receiving. An adjustable rate mortgage resets after a period of time, most commonly after three or five years. What this means for the borrower is that an introductory rate of less than six percent can balloon up to as much as three times that amount when the mortgage resets at its scheduled interval (which you may have unwittingly signed on for) during the 37th month for a 3/1 adjustable rate mortgage or the 61st month of a 5/1 adjustable rate mortgage.

These mortgages are also known as variable rate mortgages and the interest rate that you pay will vary because it is changed periodically based on factors such as the rates that are currently being paid on treasury bills or bank certificates - usually determined by reserve banks overnight cash rate or OCR which is the also known as the prime rate or bank rate. In some severe instances, the payment made each month on the mortgage does not even cover the interest that was originally scheduled to be paid when you signed on, which results in huge payment increases or the necessitates the borrower paying down the principle - which is something most working folks cannot afford to do.

Keep More Money In Your Pocket Each Month

Even if you are comfortable with your current payment, refinancing may be a good idea anyway - especially if your reset date is near. Refinancing to a fixed rate that is easier to calculate in terms of future payments can give you a sense of reassurance, especially with the economy going through such periods of turmoil.

Further, refinancing your mortgage to a fixed rate gives you the opportunity to negotiate terms that are more reflective of your income and budgetary constraints. During refinance, you can get terms that will allow you to pay your mortgage over a longer period of time with reduced payments that are easier to manage than your current mortgage.

Online Mortgage Refinancing Options

Online lenders can provide a great source of mortgage refinancing options in this new economy. Online lenders often offer rates that are more competitive than your original lender, and allow you to complete all necessary paperwork online from the comfort of your home or office.