gina.pogol@guidetolenders.com

Guide to Lenders Columnist

 Recently there was an explosion in adjustable rate mortgage financing. Escalating real estate prices pushed buyers to get in before homes became unaffordable to them. Investors bought with low payment option ARMs, intending to quickly flip the properties at a profit. Now the markets have cooled and approximately $1 trillion in ARMs will reset this year--most of them to higher rates. 

ARM rates are pegged to various financial indices, which measure the strength of the economy as a whole. When the economy heats up, ARM rates rise as well. In 2007 the most common indices are all predicted to rise, taking ARM rates up with them.

Consider a Refinance of Your ARM to a Fixed Rate Mortgage When:

1.  You aren't going anywhere.  If you don't plan to move, it may be time to fix your rate for the next thirty years   and   forget about it.
2. You're on a fixed income. If a steep rise in interest rates (link to interest rate form) could turn you out of your home, consider fixing your rate and payment now while you can still afford your home.
3. ARMs make you 3.uncomfortable. You're the one who has to sleep at night. Even if it makes financial sense to take an adjustable rate, it may not be worth sacrificing your peace of mind.  

This is a good time to evaluate your mortgage loan (link to loan form), get an idea of where your payment could be headed when your rate changes, and make a decision you feel good about.

Sources

HUD

FNMA (Fannie Mae)

Asher Institute