If you have an adjustable-rate mortgage (ARM), you’re probably dreading that daunting day when your fixed-rate period ends, and you lose that nice low rate. But what if I told you there’s a way to keep your rate low? If your fixed-rate period is set to expire soon, now is great time to consider refinancing so you don’t have to part ways with that rate stability you’ve gotten so used to. Instead, you could be saying hello to a shiny new permanent low rate.
I Have An ARM, But What Does That Mean?
With an adjustable-rate mortgage, the interest rate will change throughout the life of your loan, but only after a fixed-rate period. Typically, during that fixed-rate period, ARMs have lower initial interest rates than fixed-rate mortgages do. Homeowners who choose ARMs often due so for this reason; ARMs usually offer the lowest possible interest rate, which generally means that your upfront mortgage payment will also be lower.
After the fixed-rate period, which is usually anywhere from 5-10 years, the interest rate on your ARM will change periodically based on the market at the time. If you have a conventional ARM, the rate changes every 6 months. However, it’s important to remember that ARMs do allow borrowers to refinance, which could be the opportunity you’re looking for to make sure your rate stays low.
How Could a Refinance Keep My Rate Low?
When you refinance an ARM into a fixed-rate mortgage, you won’t have to worry about your interest rate changing. Fixed-rate mortgages have (unsurprisingly) fixed rates. For the rest of your loan’s term, it will have the same interest rate no matter what the market is like. This means that if the market’s interest rate is expected to rise at all (which it is predicted to) within the next 5-25 years – or however long it would take you to pay your mortgage off – you’d save money by locking in the current lower rate. Most people would agree that anything that will save you money in the long haul is always a good idea but refinancing an ARM into a fixed-rate mortgage may be an especially good idea for the risk-averse who may not want to bet on the direction of the market. A huge benefit of a fixed-rate loan is the predictability.
And the best part about refinancing an ARM into a fixed-rate mortgage? You can do so right now. You don’t have to wait until your adjustable-rate period begins to refinance, so it’s wise to look into your options before your fixed-rate period ends.
If you’re considering refinancing your ARM into a fixed-rate mortgage, we can help you explore your options. Don’t wait for interest rates to rise or your fixed-rate period to end; get started on your Refinance with Caliber today.