There’s lots of talk these days about whether or not to refinance an adjustable rate mortgage into a fixed rate one.
Pittsfield, MA -- (SBWIRE) -- 07/24/2013 -- Real-estate-yogi.com is here to provide some insight into this topic so people are well-informed about it, such as:
- Reasons to Refinance
- Compare Rates
- Fixed Rate Mortgages
- Who Benefits
Why One should Refinance
A person should have good reasons for refinancing adjustable rate mortgage, such as the rate is about to reset, resulting in a higher payment. Another reason to do this is to consolidate higher-interest debts into the new loan, such as credit card balances. If one is going from an adjustable rate to a fixed rate mortgage, he may be able to get a much lower, steady rate that won’t change. Too, if one’s credit rating has improved since first taking out the mortgage, it’s possible to get a lower interest rate. Any of these are acceptable reasons to refinance.
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Compare Rates among Lenders
When looking into adjustable rate mortgages, be sure to take some time to compare interest rates and loan terms among several lenders. In the search, don’t forget about online financers, who can be very competitive. A difference of as little as 1 percent can mean a great deal of money in one’s pocket. Imagine what a 2 – or 3 – percent difference could do! Also, discuss any penalties that may be included in the loan, such as pre-payment penalties. Putting the time in to do this is definitely worth it.
Fixed Rate Mortgage Benefits
There’s one major difference between adjustable rate and fixed rate mortgages. A mortgage with a fixed rate will never, ever change its payment amount, and adjustable rates mortgages will always surprise one with its payment changes. It’s easy to go for the ARM at first; it promises lower rates – temporarily. The security and safety of a FRM is usually the best bet for stability. FRMs are also better for those who are considering renting their property, either now or in the future.
Who benefits Most from ARMs?
People who are not planning to live in their homes for more than 5 years are among those who benefit from adjustable rate mortgages. First time home buyers are also drawn to an adjustable rate mortgage because of its lower interest rate, and they know they can always change to a fixed rate loan later on. If these people obtain ARMs that have “caps” and restrictions, they’ll make out better than those who don’t.
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