 |
 |
Refinancing to a Fixed Rate Eliminates ARM Adjustments
By Karen Lawson
CMR Columnist
 E-mail Friend
 Printer Friendly
Adjustable rate mortgage loans (ARMs) offer low initial rates that assist first time buyers in getting into their first home, and help others buy larger homes. ARMs eventually adjust to current interest rates, and in today's market they are adjusting upward. Depending on the terms of your ARM loan, your payment could increase by a couple of hundred dollars per month. Don't panic when your ARM mortgage payments are going up. Refinancing your mortgage can eliminate the roller coaster of ARM adjustments.
Benefits of Refinancing to a Fixed Rate Mortgage
Refinancing to a fixed rate mortgage (FRM) will stabilize your principal and interest (P & I). Your P & I payment will be the same for the life of your loan. For example, if you refinance $300,000 at 6.65% for thirty years, your P & I payment will be $1925.88. Remember, if your payment includes mortgage insurance premiums, property taxes and hazard insurance, these amounts are subject to adjustment, usually on an annual basis. A fixed rate mortgage can help you establish a more predictable household budget. An FRM is also fully amortized, which means that a portion of your payment is applied toward the principal balance of your mortgage.
If Money's Too Tight For a Fixed Rate Mortgage
As the price of everything from gas to groceries continues to rise, you might find yourself in a pinch. If your ARM loan payments increase significantly, and you can't afford refinancing to an FRM, then ask about refinancing to another ARM product, or a step rate mortgage. Step rate loans start out at a rate lower than current interest rates, and gradually increase over the first few years of the loan. This eases you into a fixed rate, fully amortized payment. If you are concerned about your ARM payments, contact your lender immediately. Don't wait until your payments are late, or other credit problems arise. Mortgage lenders offer a wide variety of loans, and they will help you find the one that's right for you.
Source
Fannie Mae Website
About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds an MA degree in English from the University of Nevada, Reno.
|
 |
|
|
|
|
