Now Is The Time To Refinance An Arm Mortgage
Owning your own home is the end of a dream and the beginning of a headache if the interest rate that you are paying off is too high, although paying quickly helps you to save money each month if you consider refinancing. Before shopping, keep in mind the different mortgages available on the financial market and go for a refinancing solution that lengthens the term of your actual mortgage, or a new low interest mortgage. Adjustable rate mortgage (ARM) is a good refinancing option, since its interest rate is adjusted periodically, moving lower or higher occasionally, but always within the same ratio. ARM mortgages are often compared with Treasury bill rates, since their fluctuation is based on a pre-selected index. ARM’s may include caps on interest rate increases and limits on the frequency of interest rate adjustments, protecting you against higher payments resulting from increasing interest rates. Another advantage when it comes to buying an ARM mortgage for refinancing is the fact of initial lower interest rates with continuous adjustments over a period of time or the life of the mortgages or loan.
Mortgages can be purchased for 15 or 30 years with fixed interest rates, that can be reduced if you refinance your home buying an ARM mortgage. Benefits from resetting your monthly payments apply immediately after switching to this option, especially when you are planning to sell your home within a few years. Today is more convenient than ever to refinance your mortgage this way because of the recent drop in interest rates allowing you to save in monthly interests. Why should you consider refinancing now? Among the many benefits that an ARM mortgage offers, including a lower interest rate and monthly payment, refinancing allows you to build equity in your home faster because your loan term is shortened, or draw an actual equity through the so-called cash-out refinance. However, it is necessary to keep in mind a few considerations before shopping for a new ARM mortgage for refinancing your actual mortgage.
Among the points of consideration, jot down the interest rate of your existing mortgage against the interest rate of a new ARM mortgage, and the total cost of refinancing. Other factors influencing your decision are your current credit status and actual income, the time that you plan to live in your home, and how much equity you have been built up in this property, if any. Most lenders require at least that 5% equity accumulated to exist in your property in order to be eligible for refinancing. Shorter-term mortgages allow building up equity faster, but they usually increase your monthly payment dramatically. Hence, analyze if you are candidate for refinancing and if the answer is yes, apply now!.