12 September 2007
Foreclosure doesn't just happen to people who don't make their mortgage payments. Your homeowner's association (HOA) can take your house or condo if you're not careful. In one case, a disabled California man lost his home in a foreclosure sale because he was $123 behind on his homeowner's dues. The house was worth $280,000. Unfair? Abusive? You bet!Read More »
The How-to-Refinance Toolkit: Adjustable-Rate Mortgages
By Richard BarringtonNFNS Columnist
As the name suggests,
adjustable-rate mortgages have interest rates that adjust periodically to
prevailing market rates. Despite this feature, and indeed because of it, knowing
when and how to refinance an adjustable-rate mortgage can have a profound
impact on the stability of your future debt burden.
Therefore, a how-to-refinance toolkit needs a special list
of situations, including how to refinance an adjustable-rate mortgage.
Going to Fixed Interest
Rates
There are a number of reasons a person might switch from an adjustable- to a fixed-rate mortgage:
- More stability. The first jump up in monthly payments due to rising rates can come as a shock to an adjustable-rate mortgage holder. If the payments are affordable at current rates, some borrowers prefer to lock in those rates rather than gamble on what the future might bring.
- A view on market interest rates. Borrowers who have a clear perspective on the financial markets might have a firmly held view on whether interest rates will rise or fall. These borrowers would favor an adjustable-rate mortgage when they expect falling interest rates and fixed rates when they expect them to rise.
- A sense of history. Even without a
forward-looking perspective on interest rates, a borrower might decide not
to fight the patterns of history. Mortgage rates are still lower than
they've been over most of the past 35 years, suggesting that an adjustable-rate
mortgage may prove to be a bet against the odds.
Other Options
As with any mortgage, adjustable-rate mortgages can also be
refinanced to extend the term of the loan as a debt-management tactic or to
obtain better terms, especially if the borrower's credit rating has improved
since the initial loan.
Despite the market unpredictability that is inherent in adjustable-rate
mortgages, a how-to-refinance toolkit is not complete without considering them as
well as fixed-rate mortgages.
About the Author
Richard Barrington is
a freelance writer and novelist who worked as investment industry executive for
over twenty years.
About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.