Refinance Out of an ARM

An unprecedented number of loans currently are set to adjust from the fixed portion of the loan to an adjustable rate. How do I refinance out of an ARM? What should I know about my ARM that is about to adjust? What are my options to refinance out of my Adjustable Rate Mortgage?

You should take a look at your loan papers to determine if you have a prepayment penalty. If you do, you will want to know for how long the term of the prepayment penalty is and how much the prepayment penalty will cost you. If you do not have a cpy of your note, you may want to call your loan servicer.

If you are refinancing out of an ARM then you should really look at fixed rate mortgages. Interest rates have recently increased and rates are still relatively low.. By switching to a fixed rate mortgage you will give yourself long term stability as opposed to an ARM.

When refinancing out of an ARM you should also consider the rate you will be adjusting to in the future rather than solely your current rate. ARM rates can adjust anywhere from 1% to 5% on your initial adjustment.

When refinancing out of your current adjustable rate mortgage, just remember that your long term fixed programs will generally be much higher in payment due to the fact that principle is being paid down with each monthly mortgage payment.

Refinancing out of an adjustable rate mortgage (ARM) can usually save you money because the interest rate and your payments will increase on an ARM after the initial period.

Current market conditions make the option of refinancing an expiring Adjustable Rate ARM mortgage to convert to a fixed rate and fixed payment mortgage more attractive than ever. Adjustable rates are at 5 year highs, and fixed rates are currently a bargain.

If you are looking into refinancing out of your Option Arm program, remember to ask your Loan Officer whether or not you have a pre-payment penalty on the loan. He/she will know whether you do or not by ordering the payoff.

» DISCLAIMER: The information contained in this article on 'Refinance Out of an ARM' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.