Consider the Trends
Mortgage interest rates are continually trending up or down. Excluding all other factors, a fixed-rate mortgage is preferable when rates are on the upswing, and an adjustable-rate mortgage (ARM) is the vehicle of choice when rates are expected to drop. Since fixed rates are relatively low right now, you might achieve significant cost savings over time by refinancing your ARM to a fixed loan.
Consider Your Future
It's also important to consider how long you're planning to live in your home. If you'd like to sell within the next few years, refinancing an ARM to a fixed-rate mortgage may not be the right move, even if the interest rate is lower. The savings you'll achieve with the lower rate may not be enough to outweigh the closing costs you'll incur. On the flip side, if you have a fixed-rate mortgage and you expect to sell the home in a few years, refinancing to an ARM might be a good idea. You can take advantage of an ARM's low initial payments now, and pay off the loan when you sell, before your higher rate kicks in.
Consider Your Needs
The state of your finances can always be an overriding factor. If you need to raise cash, consolidate debt, or lower your monthly payment, a refinance mortgage may be the most efficient course of action. Remember, too, that you might be able to use a second mortgage or home equity loan to achieve the same objective at a lower cost.
Is it time to do a mortgage refinance? Regardless of the answer, you've done the right thing by considering the question, and you won't get caught chasing your hard-earned cash into rapidly blowing winds.
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