 | Randy Vickers is the owner of Priority Mortgage Corp of Wichita, which opened in Jan. 1989, is the oldest locally owned mortgage company in Wichita. Randy has been in the real state business since 1983 and is a licensed real estate broker as well as a licensed mortgage broker. Priority Mortgage Corp of Wichita KS Lic #1996-0122. Randy can be reached at 316-721-7700 |
Real Estate
2006-09-01 16:04:00
Is it time to refinance your ‘arm’?
QUESTION: My arm is broke! Is now the time to refinance my adjustable rate mortgage?
ANSWER: Over the past 5 years there have been some times where it was advantageous for borrowers to consider an Adjustable Rate Mortgage, or ARM. These loans are typically set up with a fixed rate for 3-5 years, and annual adjustments after that. In many cases it is moving close to time for the annual adjustments to start. Because of the movement in rates the last two years, these borrowers are going to move up, some substantially. Most ARM loans are adjusted based on one of two or three interest rate indexes that are posted daily in the Wall Street Journal, or on most financial web sites. These indexes are all tied to short term rates, which have moved up substantially over the last two years, and therefore the new rate is going to adjust upwards. The new interest rates will probably move up between 2 and 5 percent which could potentially add $100's of dollars to the house payments of those on these type loan programs.Currently, although long term rates have moved up, they have not moved up to the extent of the short term rates. This makes the fixed rate mortgages more attractive and secure at this time. In many cases a refinance to a fixed rate mortgage will be lower than the adjusted ARM loan and remove the risk associated with any future rate increases. Most economists expect that there may be additional upward movement in short term rates, which will adversely effect the adjustments on ARM loans. Therefore it is worth seriously considering the move to a fixed rate loan to soften the blow of rate increases, and protect against future rate increases. This move could also allow for refinancing of Home Equity loans as the rates on these types of loans has also moved up as the national "prime rate" has increased.One other situation is this: if a borrower used an A minus or B type loan to purchase their home, it may now be a good time to look into changing over to a lower rate conforming loan if the credit issues, etc. have been resolved. These types of loans offer a great opportunity to purchase a home while repairing credit, or maybe income issues, but in most cases a borrower should look to refinance these loans as soon as possible.More questions and answers next month.....
