Switching to a Fixed Refinance Rate From an Adjustable Rate

You may like to gamble, but you wouldn’t think about gambling with your home. But in one sense, if you have an ARM (adjustable rate mortgage) you are gambling that interest rates will never get too high. By refinancing and switching to a fixed-rate mortgage, you’ll spare yourself the uncertainty of an ARM’s rate fluctuations. With a fixed-rate mortgage, you’ll know exactly how much you have to pay every month. No surprises, no risks, and no gambles.

Refinancing your mortgage and switching to a new, fixed-rate mortgage is the ideal situation for many people. Many people prefer to go with ARM because the starting rate might be lower, and because no one likes to think about the long future. Most people out of habit put these important decisions off.  And when ARM rates go up, most home owners suffer financial problems. In short, ARM mortgage can be a financial trap for many homeowners since they cannot afford payments when rates go up.

If you refinance to a fixed-rate mortgage from your current ARM, you may not come out ahead; after all, rates may fall, and you’ll then regret you switched. But you do get the peace of mind: there will be no surprises.

Staying with ARM mortgage is a good idea if you plan to sell the house in the next few years. In that case, you don’t have to worry about what happens to the interest rates many years down the road.