If you’re considering mortgage refinancing you might be tempted to go with an Adjustable Rate Mortgage to get the best refinance rates possible. Common mortgage mistakes you might not be aware of can cost you thousands of dollars; taking unnecessary risks with your loan is one of them. This article on CNN.com offers several tips before you refi about the pitfalls of Adjustable Rate Mortgage Loans (ARM).
They all but disappeared after the housing bust as homeowners grew fearful of future interest-rate hikes and rates for fixed loans fell to historic lows. But “the fear of the adjustable-rate mortgage has started to settle down,” says Steve Habetz, a loan officer in Westport, Conn.
Interest rates are still at historically low levels and the Mortgage Bankers Association is predicting they will climb above six percent soon. If your plan is simply to refinance your mortgage before the adjustable interest rate resets, you should know what that increase in your mortgage rate will do to your payments.
Let’s say you qualify for a 4.75 percent Adjustable Rate Mortgage refinancing your home today. If you plan to refinance again in 2-3 years and interest rates do rise above six percent the difference in your payment amount on a $250,000 fixed-fixed rate mortgage going from 4.75 percent to 6.0 percent is $194 a month! (That’s $2,328 a year) This is quite a gamble; even if you lock in 5% on a fixed-rate mortgage, at least you’ll be secure in the fact that your payments will never go up.
One of the most common mortgage mistakes when refinancing is taking unnecessary risks; why gamble when it comes to the security of your home? You can learn more about getting the best refinance rates for your next home loan without paying unnecessary fees by checking out my free Underground Mortgage Refinancing Videos.