At the beginning of the true “grown up” phase of life, when one searches for and finds his first home, it’s all so wonderful. Fast-forward 20 years and look at who’s after an adjustable rate mortgage refinance!
Pittsfield, MA -- (SBWIRE) -- 08/23/2013 -- Real-estate-yogi.com is here to share its knowledge of this subject so people understand it by offering some insight, such as:
- Low Initial Interest Rate
- Advantages of Refinancing an ARM
- Disadvantages to ARM Refinance
- Types of Hybrid ARMs
Low Interest Rate – At First
When refinancing adjustable rate mortgages, check out the hybrid loans out there. A hybrid refinance is one in which the first 3 – 10 years of the loan are at a fixed interest rate, and the rest of the term is adjustable. The early years are easy to budget for; the later ones are subject to change due to the adjustable rate. If a loan is written as a “7/1 ARM”, the first 7 years will remain fixed. The “1” indicates that the rate is subject t adjustment once time a year after the initial fixed rate period.
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Advantages
There are many good things about refinancing adjustable rate mortgage. One is that they’re a good deal if one is planning to live in the home for just a few years and then sell it. Another is that lower initial interest rate. A third is if one is a gambling sort and believes that the rates will go down in the future. Also, these are a good option if one expects his income to increase enough to cover the fluctuating payment amounts when the rates change.
Disadvantages
Refinance adjustable rate mortgage may not be so good if one is planning to leave the house before the initial fixed rate period is over. Another disadvantage to them is that interest rates will increase in a rising rate situation. Any increase in rates will increase one’s monthly payment, which can put one is a precarious position, and an increased rate will decrease the amount of equity one can accumulate.
Varieties of Hybrid ARMs
Adjustable rate mortgage refinance can come in anywhere from a 3/1 to a 10/1 situation. This means that the rates will remain set for the first 3, 5, 7, or 10 years and then begin fluctuating. As rate go up, so does one’s payment, and as they go down, the payment does, too. It is totally at the borrower’s discretion as to which hybrid refinance loan he prefers.
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