Refinance Adjustable Rate Mortgage

Refinance adjustable rate mortgage loans to a fixed loan is a wise thing to do if a person or family has decided that the area presently lived in is perfect and plan to stay for a very long time. Many people, when buying a house, first choose an adjustable rate lending agreement for a couple of reasons. First would be uncertainty about the immediate future. Questions such as "How long will my job last or what if my next door neighbor is a serial dog kidnapper?" can haunt a home buyer. And besides, an adjustable is often cheaper than a fixed rate and since it is cheaper, a buyer can get just a little more house for his money. Look at some families who decided to refinance adjustable rate mortgage loan agreements to something more befitting of their situation.

The I Love the Air Force family moved to a new air base and bought a house the family loved out in the suburbs. The colonel's initial hitch was for five years and the family bought a house they really like with an adjustable rate mortgage (ARM). Two things occurred with the I Love the Air Force family to make them want to refinance adjustable rate mortgage agreements the family had made several years earlier. First, the colonel got a promotion to second in command and the house payment had begun creeping upward because of hard economic times across the country. Since a VA loan did not meet the exact needs, the family went with the bi-weekly fixed loan where half of the monthly payment is paid every two weeks, thereby paying a thirty year mortgage off in twenty one years.

The man known as the Snake Man in his neighborhood because of his twenty five reptiles he owned also wanted to refinance adjustable rate mortgage agreements he had made many years earlier. Like most ARM holders who eventually convert, higher creeping monthly loan payments were becoming an annoyance. Once his monthly payment had slithered one hundred dollars above his original payments, he decided to de-fang the situation by getting a new Fannie Mae fixed loan. For a one percent cost plus two hundred and fifty dollars, the man got a fixed fifteen year loan. When the neighbors heard he would be around another fifteen years, joy abounded. "The fool hath said in his heart, there is no God. Corrupt are they, and have done abominable iniquity: there is none that doeth good" (Psalm 53:1).

The Happy As a Clam clan had lived at the present address for only two years but had seen the ARM climb each month because of market volatility. This family also decided that the time was right to refinance adjustable rate mortgage agreements that had been made, but knew that retirement was exactly ten years away and planned to move to the mountains of Tennessee at that time. The decision was to get what is known as a Two-Step loan. This mortgage gives the Happy Clam clan a fixed rate for ten years, and then readjusts to the current fixed rate at that time. Since the majority of homebuyers in the current American market stay in homes for seven to ten years, this type of mortgage was developed. Making plans for the future are fine, but Jesus told the story of a man who made very big plans but God had others in mind. "But God said unto him, 'Thou fool, this night thy soul shall be required of thee: then whose shall those things be which thou hast provided?'"

The Silver Threads Among the Gold senior couple had one more year to pay on the present ARM loan. The high cost of living continued to rise and social security wasn't enough to pay the bills. The couple had been missionaries and never had any retirement money put aside, so the twosome needed to refinance adjustable rate mortgage agreements they had, but theirs was a whole different plan. This senior couple decided to get a reverse annuity loan. This creative loan enables the twosome to maintain ownership of their home, but pays them a monthly payment based on a percentage of the home's value. This is tax free income for as long as the two live or until the two move. There are risks involved so a financial counselor was consulted before the couple made such a move.

ARMs are extremely popular when people first buy a house. ARMs represent lower house payments than a fixed loan leaving the home buyer with more money for buying furnishings, appliances and other necessities. On the other hand, the winds of change are always blowing and that certainly include economic conditions. While most ARMs have a cap on how high the mortgage rates can go during the life of the loan, the agreements can often soar as much as eight points, meaning that a house payment could double over the period of a few years. So to refinance adjustable rate mortgage agreements to a fixed mortgage is usually the only way to stop the bleeding.

Of course, to change or refinance adjustable rate mortgage agreements made in years past means that a person's credit scores must have remained high. Since there are a number of things that go into making a good credit history, any one of them can skewer the numbers downward. Factors such as how much debt to income ratio is there presently, how close are accounts to being maxed, how often has a person allied for credit in the past year and how many late payments are on the record are all things that could have been changed since the initial ARM was granted. Can you imagine the situation a borrower could get into that wants to convert to a fixed mortgage because the ARM rates keep going up over the years? So much debt has been incurred that there is almost no money for food and gas and because of a downward spiraling credit score the owner cannot be approved for a fixed lending agreement? The Happy As a Clam Clan can quickly turn into the Three Bears.

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