Post image for What You Need to Know About ARM Mortgage Rates

What You Need to Know About ARM Mortgage Rates

by Guest on April 6, 2011

An ARM, or Adjustable Rate Mortgage, is a home loan that features an adjustable interest rate. This rate depends on the current economic index.

Many homeowners choose an ARM mortgage because these loans offer very low interest rates for a certain amount of time, called the initial rate period. After the initial rate period is up, the interest rate will then be reset. If interest rates have fallen since the loan was obtained, this can be a good thing. However, if rates have risen, the homeowner’s rate will be increased and their payment will go up.

When to Consider Refinancing an Adjustable Rate Mortgage

Adustable Rate Mortgages are subject to three different caps: an initial, periodic, and lifetime cap. The initial cap is how much the interest rate can increase the first time the rate is reset. The periodic cap is the most the interest can increase during an adjustment. Lastly, the lifetime cap is how high the interest rate can go over the life of the loan.

If your ARM mortgage is going to reset and your rate may significantly increase, you may want to consider refinancing. In order to avoid a significantly higher payment, a homeowner may want to consider refinancing a few months before the initial reset. This way, the refinance will be complete before the homeowner’s rates are adjusted.

However, if you have a very low rate on your ARM mortgage, as well as low initial and periodic caps, you may not need to refinance until the next reset. When to consider refinancing an ARM depends on the terms of your particular loan.

How to Get Low Adjustable Rate Mortgage Rates

Many homeowners want to refinance their mortgage, but are unsure of how to get low ARM refinance mortgage rates. The rate that you are offered will depend on your credit and ability to repay the loan. In order to secure a low rate, you may need to work towards improving your credit. Fortunately, if your credit score is already high, you will be in a good position to secure a low rate.

Rates are also based on the current market. If you are determined to refinance when ARM refinance mortgage rates are low, you will need to keep an eye on the market. If possible, depending on when your interest rate will be adjusted, make your move when rates are low or begin to decrease.

The Benefits of Refinancing an Adjustable Rate Mortgage Loan

There are a number of benefits to refinancing an Adjustable Rate Mortgage loan. When refinancing, many homeowner decide to obtain a loan with a fixed-interest rate. This will offer stability, instead of having to worry about the next time your rate is due to be adjusted.

Also, if you have built up a large amount of equity in your home, you may be able to lower your monthly payments and/or even receive cash back while refinancing. This cash can be used to pay off other, high interest debts or to meet another financial need. In order to take advantage of the best ARM refinance mortgage rates available, homeowners need to determine when to refinance and what they are looking to achieve by refinancing their home loan.

This has been a guest post provided by Refinance Mortgage Rates.

Google+ Comments

Related Posts