Should I Refinance my Adjustable Rate Mortgage Now or Wait for the Interest Rates to Drop?

By: Maria Ny
Submitted: 2007-01-17 16:16:07
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With interest rates on the rise, many people are wondering if they should refinance their adjustable rate mortgages (ARMs), especially since about one in four mortgages will have their interest rates reset in 2006 or 2007. This means your interest rate is adjusting, and probably sooner than you think, especially if you're holding 2/28 or 3/27 hybrid ARM. You know your payment is increasing, maybe to as much as $300 per month, as the rates continue to rise. So, now the question is whether to refinance into an interest only mortgage, another ARM or go with a fixed rate mortgage. If you're only planning to stay a few more years, you may want to consider an interest only mortgage or another ARM that offers a longer fixed period before the interest-rising adjustable period.

The introductory rate may be higher than for your old loan--an average of about 6.09% for a 1-year ARM and 6.59% for a 5-year ARM, up from about 5.2% this time last year, but probably a lot less than what you will be paying when your interest rate adjusts. If you plan on staying for a long time, you may want to get a 30 year fixed or 40 year fixed mortgage rate loan. The average cost for a 30-year fixed-rate loan rose to 6.93% in Interest.com latest survey, and Federal Reserve Bank raised the rate it charges banks to borrow money another quarter-point last week. 40 year fixed rate mortgages will probably run you anywhere to one quarter to one half of a percentage point higher. You will pay more for other fixed-rate loans as well, according to Interest.com, the national survey of lenders: 15-year loans climbed to 6.57% after holding in the 6.3% range for the past month, up from 5.23% one year ago. 30-year jumbo loans (for more than $417,000) rose to 7.11%, up from 5.89% this time last year.

If you plan on getting a fixed rate loan, you should act quickly because mortgage rates are predicted to push past 7% over the next few weeks. Do you have an adjustable mortgage rate home equity loan or home equity line of credit (HELOC)? If so, you may want to consider mortgage refinancing into a fixed rate second mortgage loan because introductory rates for ARMs, are rising even faster than those of fixed mortgage rate loans. Act quickly before rates rise again.

Maria Ny is a respected free-lance writer from San Diego, California. She has written many articles that covered a broad range of subjects ranging from Bankruptcy Reform, Credit Repair to Subordinate Financing. Check out her informative articles online at BD Nationwide Mortgage Refinance Loans. Learn more about bad credit refinance requirements and get additional information including a free mortgage quote for debt consolidation loans. We suggest you get more information and learn more about the guidelines for a Bad Credit Second Mortgage that could save you money by reducing your monthly payments.

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