Virtual Loan Officer :: Mortgage Market

Refinance out of your ARM Now!

Mortgage industry leaders have a warning for people already struggling to make their adjustable-rate mortgage payments: Get out of them now.For many homeowners who bought a home three years ago during the low rate trend, this might be the first big rate adjustment, and it's a doozy

Adjustable-rate mortgages normally start at a lower rate than the traditional 30-year fixed-rate mortgages, and are periodically adjusted to reflect current interest rates — and there are hundreds of different types.

But for many people who bought a home three years ago during the low rate trend, this might be the first big rate adjustment, and it's a doozy.

For those who had been paying about 4 percent interest, the rates could jump to 8.5 percent or 9.5 percent when the rates reset. "It's going to double the payment," said William Hobbs, senior loan officer with Carteret Mortgage Corporation in Manassas, VA. "They could literally see their mortgage double this year."And that's just the first adjustment.

The increases are happening in part because the Federal Reserve has raised short-term interest rates 15 straight times since June 2004. While many adjustable-rate mortgages, known as ARMs, cap increases at 2 percentage points per year.And therein lies the potential disaster.

While ARMs were designed for short-term buyers, Hobbs said many people have used the lower introductory rates as a way to buy a house for the first time. Average interest rates rose last week to 6.49 percent on a 30-year fixed-rate mortgage, according to Freddie Mac, the nation's second-largest mortgage lender. That's up from an average 5.89 percent at this time last year, and it's the highest average since July 2002.

The best advice at this time, is to refinance out of your ARM before it makes that first initial adjustment, get into a 30,20 or 15 year fixed rate while the rates are still relatively low. Use the Refinance analysis calculator to determine what your savings will be. Then apply online or call Bill Hobbs at 888 702-0652

posted by William Hobbs @ 7:54 AM