Is it time to break your ARM?
special to the daily
Home mortgage interest rates are close to historic lows. Home prices here in the High Country have fallen back to prices we saw three, maybe four, years ago. And the prospect of higher interest rates is on the horizon. So why not look at look at taking advantage of the low mortgage rates and real-estate prices?
If you are currently a homeowner and you plan to stay in your home for a long time, now is the right time to look at locking in low mortgage interest rates. This is especially true if you currently have a short term Adjustable Rate Mortgage (ARM). If you have a five or seven year ARM and the rates have recently fallen into the three or four percent range you should be happy. But if your ARM is going to adjust soon plan on rates rising and now is the time to convert to a 30 year fixed rate mortgage.
Thirty year mortgages are now running in the five percent range. This is a fixed rate for 30 years and gives you the best rates that I have seen in years. And if history repeats itself expect to see thirty year mortgage rates going up at least three percent within a couple of years. So when the thirty year rates go up your ARM will adjust up too. It may be the right time to break your ARM and refinance your short term mortgage to a thirty year mortgage.
If you have a $300,000.00 mortgage and your interest rate on your ARM is four percent you can convert to a thirty year mortgage at 5 percent. So you say that’s crazy to increase your mortgage by one percent. But if you see your home mortgage interest rates go up to six percent when your ARM adjusts your payments will be $186 a month higher than if you locked in a thirty year mortgage.
For those of you that are looking to buy a new home and you anticipate staying in that new home for a long time the thirty year mortgage is a still a great way to go. The security of knowing what your mortgage payment will be two, five or even 10 years from now makes budgeting easier and in many cases will let you sleep knowing that you are locked in for 30 years.
The bottom line is that you should look at your ARM and if its due to adjust soon break it, if you are looking to have a more secure financial plan look at thirty year mortgages now.
Bob Kieber can be reached at
(970) 262-1199 or at firstname.lastname@example.org. He is a local mortgage lender and
principal of Resort Lending.
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