Refinance Your Adjustable-Rate Mortgage Today!
Many people spend years dreaming of owning their own home. But then, when it finally happens, the dream turns into a nightmare of trying to make their monthly mortgage payments. These individuals often turn to refinancing as a way to reduce those payments and make the costs of home ownership more manageable.
To get a good refinancing deal, you need to be aware of the different types of mortgages that are available to you. The ways to save money in monthly payments are to increase the duration of your mortgage, get a lower interest rate, or both.
Many people are interested in adjustable-rate mortgages. They tie the interest rate to the current market interest rate, meaning that your monthly payments will fluctuate with the market. If market interest rates go down, this is a good thing. Unfortunately, if market rates increase, you will be paying more each month.
Adjustable-rate mortgages are similar to treasury bills, in that the fluctuations in the interest rate are tied to an index that was selected when the financial tool was issued. The adjustable-rate mortgages sometimes include interest rate caps in terms of how high the interest rate can go, as well as how often the interest rate can be changed. These caps are critical, as they help the mortgage holder avoid paying too much each month if and when market interest rates increase greatly.
A typical adjustable-rate mortgage lasts for a period of 15-30 years, but you can request a shorter or longer term. If you plan to sell your home within a short period of time, extending the term of the loan and enjoying smaller monthly premiums can be a good option.
Now is the time to refinance your adjustable-rate mortgage, because market interest rates have recently fallen. You can seize this opportunity to have lower monthly premiums. Refinancing can also speed up the rate at which you build equity in your home, if you shorten the term of the mortgage. You also have the option of taking advantage of that equity now by completing what is known as a cash-out refinance option.
To refinance your mortgage, keep all of your options in mind. Know what interest rate you’re currently paying, and what the running market interest rate is. Also, consider the total expense of refinancing your mortgage. You’ll also want to look at your credit history and net income. Carefully consider how long you will continue to live in the home, and how much equity will have been accumulated by then.
In most cases, you need at least 5% equity to be eligible for the refinancing options described here. Remember that mortgages with shorter terms build equity more quickly than do longer-term mortgages, but they also have higher monthly premiums.