Mortgage News and Notes

Maybe it's time to trade in that ARM for a fixed rate

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 Us page.

 

Margie Hofberg, President

 

Posted by Steven Hofberg on August 1st, 2019 12:15 PM

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