August 1st, 2019 12:15 PM by Steven Hofberg
One of the many reasons why I love my clients is that I frequently
get ideas on helping other homeowners from them! I recently spoke to a few clients
who have great rates on their adjustable rate mortgages (ARMs) right now, but
only have one or two years remaining in the initial fixed term before the
adjustable rate kicks in. They are concerned about what may happen to their
rate and monthly payment in the future.
Another client that I spoke with has a seven-year ARM at 3.5% rate
with two years remaining before it adjusts to market. No one can predict where
rates will be two years from now, but we do know that today’s rates are at
historic lows. So even though refinancing to a fixed-rate mortgage would give
her a slightly higher rate, the peace of mind from a fixed-rate mortgage at a
really good rate made the decision to refinance an easy one for her.
If you are in a similar situation, please consider this: since
your initial rate on an ARM tends to be below market, and because LIBOR has
gone up, the first adjusted rate is almost certainly going to be higher. That
increase can be as much as the maximum 5% adjustment, meaning a 3.5% rate can
become a 5.5%, 6.5%, or an even higher rate instantly.
The question is, should
someone with a soon-to-adjust ARM refinance while fixed rates remain low? The
answer, of course, is that it depends on your particular situation. However, it
would be worth your time to let me run the numbers for you. Email me at Margie@rmcenter.com or go to the Contact