When the fixed-rate phase of your adjustable-rate mortgage (ARM) expires and you lose your attractive low rate, you're undoubtedly dreading that looming day with dread. What if I told you that there is a way to keep your rate low, though? Now is an excellent time to think about refinancing if your fixed-rate period is about to end so you won't have to give up the rate stability you've grown accustomed to. Instead, you can be introducing yourself to a brand-new, attractive, and affordable rate.
What Does It Mean That I Have An ARM?
The interest rate on an adjustable-rate mortgage will fluctuate over the course of the loan, but only after a fixed-rate term. ARMs often have lower initial interest rates than fixed-rate mortgages do during that fixed-rate period. Because ARMs often offer the lowest interest rates, which normally means that your first mortgage payment will also be cheaper, this is one of the main reasons why homeowners pick them.
The interest rate on your ARM will fluctuate periodically based on the current state of the market after the fixed-rate period, which is typically between five and ten years. The rate on a traditional ARM fluctuates every six months. It's crucial to keep in mind that ARMs do permit refinancing, which might be the chance you're hunting for to guarantee your rate stays low.
How Could a Refinance Maintain My Low Rate?
You won't have to be concerned about your interest rate shifting if you refinance an ARM into a fixed-rate mortgage. Mortgages with fixed rates have, unsurprisingly, fixed rates. No matter how the market is doing, your loan's interest rate will remain the same for the remainder of its duration. This means that locking in the current lower rate would save you money if the market's interest rate were to climb at all (which is forecast to happen) within the following 5 to 25 years, or however long it would take you to pay off your mortgage. The majority of people would concur that anything that would save you money in the long run is always a good decision, but for risk-averse people who may not want to speculate on the direction of the market, refinancing an ARM into a fixed-rate mortgage may be an especially beneficial option. The dependability of a fixed-rate loan is a major advantage.
What is the benefit of switching from an ARM to a fixed-rate mortgage? You may do so at this time. It's a good idea to research your alternatives before your fixed-rate period expires because you don't have to wait until your adjustable-rate period starts to refinance.
Check out our refinance articles to learn more about the procedure and advantages since refinances can be handy for more than just changing your loan type.
This article was contributed on Jul 31, 2022
