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Refinance My Mortgage - But Only If I Can Go From An Adjustable Rate To A Fixed Rate Mortgage And Lower My Payment

By Expert Author: Rob K. Blake | Article Abstract
Word Count: 610 words | Views: 152 view(s)
There are so many people out there with adjustable rate mortgages that absolutely have to refinance and get out of them. However, when they find out that the fixed rate is higher than their low introductory ARM rate, they say no to a refinance. How much of a payment bump are they looking at and what can they expect if they do not refinance?

Most people have no idea what kind of mortgage they have. They only focus on their payment. If they feel comfortable paying it, then the mortgage could be a ticking time bomb and they would not know it.

All over the TV, are advertisements telling you to get out of your adjustable rate mortgage and refinance into a fixed one. And that could not be a smarter idea right now. So people hear that and they at least remember their mortgage is adjustable so they call.

When they got their mortgage their interest rate was 5.00% for example. Their adjustable rate mortgage is set to adjust in a couple of months so they think this must be the smart thing to do. Then, they find out the fixed rate is 6.25%. On a $230,000 mortgage, the difference in payment would be roughly $180 more than they pay now. And they freak out.

But what they are missing is the payment they are enjoying now is only good for another couple of months. Their payment will go up anyway. The question they should be asking is how much? At least with a fixed rate mortgage you know what your payment will be forever. It will never change. And if these people would remember back to when they got the mortgage, they would hear the loan officer tell them that by the time it adjusts they can refinance out or sell.

No one ever plans to be in an adjustable rate mortgage when rates are going up. What makes an ARM go up anyway? The rate for an ARM is calculated by adding together an index and a margin. The introductory fixed rate that most people get in the beginning of the ARM is not the actual rate.

Every ARM is different and you have to check your mortgage note but most have the introductory fixed part for 1 to 10 years and then it adjusts after that. But the mortgage has been adjusting the whole time. When your introductory period is over, the adjustment period starts.

You have to check your mortgage note to find out how much it will rise on the first adjustment. Some ARMs have a 5 point first adjustment cap! That means on the first adjustment your interest rate can go up 5 points.

Why would your ARM adjust upward? Well because the indexes are all going up and have been for a while. Just a couple of examples of different indexes are the Treasury and the Libor. The Treasury has gone up from 1.595% in September of 2004 to 4.863% in September of 2007. The Libor has gone up from 2.1695% September of 2004 to 5.53500% in September of 2007. Your margin is the number that stays the same so add the margin to the index and that is your rate.

If you are planning to stay in your home, you do not have a choice. Your payment will go up either with a refinance or with the adjustment. Which would you rather have, a 6.25% rate or a 10% rate?

Good Luck!
Rob K. Blake

About the Author/Author Bio

Rob K. Blake, author of the BUILD System, shows you how to "Refinance My Home" and always get the lowest rate possible! Rob has created a new mortgage calculator called "No Cost" Mortgage Software- Saving You Thousands Even Without Refinancing! Click to have Rob "Teach Me How To Refinance My Mortgage" for the only "insider" tips and tricks!

Article Source: http://www.articlesphere.com/Article/Refinance-My-Mortgage---But-Only-If-I-Can-Go-From-An-Adjustable-Rate-To-A-Fixed-Rate-Mortgage-And-Lower-My-Payment/106867

Article Submitted: 2007-10-10 | This Article has been viewed 152 times.

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