Do many borrowers have the same question in mind in the face of the global financial crisis? Should I refinance my mortgage now? Now may be the time to refinance your mortgage, depending on the type of mortgage you have and how long you plan to stay in your home.

Mortgage Types

Adjustable Rate Mortgages (ARMs) are the type that most financial advisors suggest homeowners refinance. An adjustable rate mortgage (sometimes called a variable rate mortgage or VRM) is a mortgage that is written with an adjustable rate that will adjust at certain intervals due to market conditions and the bank’s prime rate, usually based on an index that is published on financial days like the New York Times.

Depending on the loan agreement you signed when you obtained your adjustable-rate mortgage, your rate may adjust in 3-, 5-, or 10-year intervals, or even more frequently. What this can mean to the unsuspecting borrower who enters into such agreements is that the payment amount that started at, say, $650, can skyrocket in a few years to $1,100 or even more. The adjustable rate mortgage has caused many homeowners to go into foreclosure or, at the very least, bankruptcy. You could be next if your mortgage payment is spiraling out of control, or if you’re having trouble meeting bills other than your mortgage obligation.

If you have a fixed rate mortgage, like many people, you have been making the same payment and will continue to make the same payment until the mortgage is paid off. The predictable and fixed payment is one of the best features of the fixed rate mortgage.

Should I refinance?

If you plan to stay in your home for a short period of time, such as less than ten years, then no, you should not refinance your ARM at a fixed rate. Your adjustable-rate mortgage probably came in at a great rate, and refinancing will now cause you to incur a lot of refinancing-related expenses, like appraisal fees, attorney fees, and more. However, if you plan to be in your home for the long term, refinancing for a better rate and a predictable monthly payment is a great idea, so yes, you should get rid of your ARM if these conditions are met. Doing so can save you thousands of dollars over the life of your mortgage.

The same goes for refinancing from a fixed rate mortgage to an adjustable rate mortgage. If you plan to be in your home less than ten years, you may benefit more from having an ARM instead of a fixed rate. The costs associated with refinancing can be worth it, especially if you get a great introductory rate.

where you can save thousands

There are many excellent financial institutions that work with homeowners online to find the mortgage refinancing product that works for your unique situation. Contacting a lender online is easy, and they often have savings to offer instead of your local bank.