When Refinancing Makes Sense: Discover the key triggers – rising market rates, long-term stay plans, improved credit profiles, and budgeting stability – that indicate it’s a smart move to switch your Adjustable Rate Mortgage to a fixed-rate loan.
When to Hold Off: Learn the red flags – impending home sale, current ARM rates still lower than fixed options, high closing costs, or recent financial setbacks – that suggest you should pause before refinancing.
Real-Life Homeowner Scenarios: Explore relatable examples for first-time buyers, growing families, and empty nesters to see how refinancing an Adjustable Rate Mortgage can impact different life stages.
There are several types of mortgages available when buying a home, including an Adjustable Rate Mortgage, often referred to as an ARM. This type of mortgage definitely has its benefits, such as lower interest rates and lower monthly payments at the beginning of the loan. Keep in mind that when it comes to the adjustment period, rates may be higher, causing your mortgage payment to increase.
Not sure if it’s the right time to refinance your Adjustable Rate Mortgage? We've created this guide to help you understand your options and know when the best time is to refinance your Adjustable Rate Mortgage for a smart money move.
Due to the unpredictable nature of an ARM, some homeowners often choose to refinance and change to a fixed-rate mortgage instead. This may or may not be a smart option, depending on factors like the ones below.
Rising Market Rates – When market rates are on the rise, locking in a fixed interest rate may offer long-term savings opportunities.
Planning to Stay in the Home – If you plan to stay in the home long-term and want an option for payment stability.
Improving Your Credit Score – When your financial profile has improved, including an increase in your credit score or income, you may qualify for a better interest rate and better terms.
Keeping Your Budget in Check – Refinancing your Adjustable Rate Mortgage gives you a stable monthly payment for the term of the loan.
Planning to Sell Soon – If your plans include moving or selling your home within a few years, it might not be the right time to refinance as you will be selling the home and satisfying the mortgage soon.
Check Your Current Mortgage Rate – If rates are higher than your current mortgage rate, it may not make financial sense to refinance.
High Refinancing Costs – Closing costs and other fees can be significant. If the potential savings from refinancing to a fixed rate are less than the costs to refinance, you may want to hold off on refinancing.
Change in Finances – Things happen and your finances could change for a variety of reasons including a decrease in income, recent change of jobs, etc. If your financial situation has changed, it may make it more difficult to qualify for favorable refinancing terms.
Before refinancing your Adjustable Rate Mortgage, there are some key financial elements you should review to ensure it's the best money move for your unique situation.
As with any type of financing, there are advantages and disadvantages. Here are some to consider when refinancing an ARM.
Refinancing an Adjustable Rate Mortgage may or may not make sense. This decision truly depends on the unique situation of every homeowner and what stage of life they're in. Here are a few examples of how and when refinancing an ARM can affect your financial goals.
First-Time Homebuyer: May benefit from the stability of a lower interest rate and payment during the initial ARM period until they get used to making mortgage payments.
Growing Family: A growing family with a variety of expenses could benefit from a fixed rate mortgage with a consistent monthly payment that allows them to prepare for long-term budgeting.
Empty Nesters: Refinancing an Adjustable Rate Mortgage might not be a good idea for empty nesters if their plan includes downsizing or relocating soon.
Refinancing an Adjustable Rate Mortgage is a personal decision that should align with your long-term goals and current finances. Refinancing an ARM can be a smart move – especially if market trends anticipate rising interest rates. As with any major financial decision, it's important to take some time and evaluate your needs, potential costs, and current situation before committing.
As always, Peach State is here to help you navigate your options and find a solution that fits your budget and financial goals as we guide you every step the way. We invite you to contact our lending lending team to explore the available refinancing options that will work best for you!