Mortgage RefinancingHome Loan Mortgage Refinancing, Home Equity Line of Credit, Debt Consolidation, Home Purchase Mortgage Loans |
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Ajustable Rate Mortgage (ARM) An adjustable rate mortgage will generally have lower rates than fixed rate mortgages making them more appealing for mortgage refinancing and new home purchases. This makes sense due to the fact that the average consumer would opt for a fixed rate mortgage loan if rates were the same because if they happened to stay in their home longer than expected no mortgage refinancing would be necessary in the future to keep their original interest rate and monthly payment. ARM's do carry some risk. If the value of a home decreases and the homeowner is unable to refinance the mortgage or sell their home they are at the mercy of fluctuating interest rates. As interest rates fluctuate so do monthly mortgage payments for the homeowner. The higher the original down payment on the home is the less risk ARM's have. This is because equity determines the ability to refinance a mortgage or sell a home. If the home is worth less than the loan balance lenders will not refinance the home due to the high risk of default on the new loan. Likewise, If the home is not sold for at least the balance of the loan the lender will need the remaining balance paid in full to complete the sell. At the end of the day although ARM's do have lower interest rates it is very important to consider their risks. If the risk is deemed acceptable based on the down payment and future home value forecasts they are a good option for those that plan on moving or refinancing their adjustable rate mortgage loan within 3 - 5 years. |