Financial Facts: Is it time to break your ARM? |

Financial Facts: Is it time to break your ARM?

On every radio station I am hearing advertising on how mortgage interest rates are rising and you need to lock in a fixed rate today. I do agree that rates have a great probability of going a lot higher. But I do not always agree to the statement that you need to lock in a fixed-rate mortgage. There are way too many variables to make such an across the board statement.

My first question to you would have to do with the date your Adjustable Rate Mortgage can first adjustment. If you are in the first year of a five year mortgage chances are you have little reason to switch to a fixed rate mortgage. If you have just a month or two before the adjustment occurs then I would suggest we sit down and look at how the mortgage can adjust. The adjustment may be based upon a couple of monetary indexes, such as the Treasury Bill or the Cost of Funds Index, known as a COFI index. Keeping the current loan may be very expensive or very cheap, but investigation of your particular loan is the only way to determine what may happen to your payments.

The next question I have has to do with the time you plan to own this particular property. If you plan to keep the home for years then we should look at refinancing the current mortgage. We might even want to roll in other loans such as second mortgages. If you plan to sell the home this summer then I can tell you that it is a waste of money to refinance now.

Another question I would ask is the original mortgage amount and the current balance. If you plan to pay off the mortgage in the not too distant future we would then figure out if a refinance would really save you money. Plus, if your balance is in the conforming limits, that means a balance of less than $729,750 and your original loan was a jumbo loan, then we can obtain a lower rate as jumbo’s rates are higher than conforming interest rates.

If you do plan to stay in the home for years to come and the adjustment date of your mortgage is coming soon then it will be worth your time to discuss a refinance. You might be able to combine other debts into the refinance and you can do this without any out of pocket expenses too.

In the discussions with the mortgage professional you may find out that you are in fine shape. You may find out that a refinance will not save you enough to go to the time and expense of a refinance. But by taking the time to find out this fact should sleep better at night knowing that your finances are in good shape.

For answers to your mortgage related questions call Bob Kieber are (970) 262-1199 or e-mail him at Bob is a local mortgage lender and principal of Resort Lending. He has 30-plus years of professional experience in real estate, finance and investments, and is a longtime resident of the High Country.

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