Fixed Refinance: When Is It Applicable?

2007-06-20 15:49:53

( Financial )



There are advantages as well as disadvantages to both a fixed rate and an ARM mortgage, but for the lender who is contemplating about refinancing their ARM mortgage, there are many considerations. When you convert your ARM to a fixed-rate refinance, you will prevent a payment enhancement when your ARM rate starts to change. Likewise, you will be on the lookout for a more established payment term for your mortgage.

Evaluating Your Current Loan

If you are faced with a situation wherein you need to refinance, be aware of what is happening in the market. Ensure that you are transacting with a knowledgeable and trustworthy loan officer or mortgage broker. There are times when the yield curve reverses, and refinancing mortgage can be converted into a thirty year fixed refinance, at a lesser or similar three to five years ARM.

There is a need for you to discover the point where you will break even in your present loan. Have you already reached that point? If you haven’t, find out the cost if you maintain your present loan. Have a direct conversation with a broker to find out what action is best.

Benefits of a Fixed Refinance

In an economic environment where short term and long term rates are almost equal, it may be better to refinance flexible mortgage refinancing rates into a fixed refinance. Persons who are on the lookout for a new home are willing to divide the risks of a changing mortgage rate when the flexible rate is considerably lesser than fixed refinance. If there is an absence of such advantage, fixed refinance is often the preferred option.

Many people acquire flexible mortgage rates due to the fact the credit disputes kept them from getting a reduced permanent rate. If your mortgage payments have been settled promptly and your credit rating have improved you may avail of a fixed refinance without an increase in your payment.

When affordability is a determinant of the structure of your mortgage, find out if arranging your loan as a flexible rate will provide you with more flexibility.

When considering refinancing your adjustable rate mortgage (ARM) into a fixed refinance, your initial decision is the length of your stay in your home. If you are in the second of your 5 year ARM, and envision yourself living in that house for another couple of years or so, then you may want to hold on until it is complete necessary to make the move. Your mortgage agent can recommend the courses of action; however, they have no information on what will happen for the coming years. Presently, they also have no knowledge of the length of period you will remain in your home, including the factors that may oblige you to transfer.


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