To Refinance or Not? Variables Are Many

Adjustable-rate mortgages (ARMs) have received some bad publicity during the recent real estate crisis, often getting categorized with other kinds of mortgages, such as interest-only, zero-down-payment, and “pay-what-you-want” loans, as products that could financially imperil homeowners. ARMs come with an initial one-year, three-year, five-year, seven-year, or, sometimes, 10-year fixed rate before the rate starts to adjust, usually annually. Financiers recommend that borrowers scrutinize their ARM agreement carefully before automatically deciding to refinance because, with interest rates hovering near zero, their adjusted mortgage rates are not likely to lead to more costly monthly payments. “If their loan has reset recently or is about to, and the index their loan is tied to is lower, then their payments may stay the same,” says Alex Lieb, operations manager for Presidential Bank affiliate Access Capital Mortgage in Bethesda, Md. “For some people, their payments could even be lower.” Lieb says refinancing may not be the best option for some of those ARM borrowers, particularly if they are going to sell their home in the next 12 months or so. | Read More