The Adjustable Rate Mortgage (ARM) is making a comeback and pushing already low-interest rates into undiscovered territory. If you’re considering mortgage refinancing with an ARM there are several things you need to know about the risk and rewards as well as what this home loan will cost you. This article from CBS Money Watch explores some of the reasons why you might want to steer clear of the Adjustable Rate Mortgage loans when it comes to mortgage refinancing.
They’re back. Sort of. After all but disappearing when the real estate bubble burst, adjustable rate mortgages (ARMS) are staging a comeback. Falling to about one percent of all mortgage applications in 2009, adjustable rate mortgages now account for about six percent of the market, and just this past weekend The Wall Street Journal weighed in with a piece titled Home Loans: A Call to ARMS? that led with the news that “Adjustable-rate mortgages, out of favor for years, are looking like a deal.
The article makes to excellent points. First, interest rates are at near historic lows so the ARM is in many ways a relic of double-digit interest rates from the 1980s. Second, is financial risk something you really want to be taking with your home, which for many people is the largest and most important purchase ever?
On that note, understanding fees will go a long way to save you money once you’ve eliminated risk from the equation when it comes to your mortgage refi. Because mortgage rates are so ridiculously low now and just about anyone can get the best refinance rates for their home loan, the factor determining how good of a deal you’re getting is the fees you’ll be required to pay at closing. These closing costs include the loan origination fee and an assortment of lender and broker fees that may or may not be junk.
Lender junk fees like the mortgage rate lock fee serve no purpose other than creating extra profit for the lender or broker at your expense. Keep in mind that before you’ll get any benefit from that shiny new mortgage rate you’ll have to recoup all the closing costs you paid to get the loan. The more you pay, the longer it’s going to take you to break even.
You can learn more about avoiding unnecessary markup of your best refinance rate and junk fees by checking out my free Underground Mortgage Refinancing Videos.