How To Refinance to a Fixed Rate MortgageArticle Posted by Expert Author: Tony Caro on 09/09/2013
You may have realized you are better served refinancing to a fixed rate mortgage and eliminating your current variable (adjustable) rate mortgage. But there is a process involved that you might want to follow.
Many homeowners may have gotten their ARM loan when rates were low and banks were eager to help homeowners. But today has seen many interest rates becoming too much for homeowners to handle, along with their monthly payments. Refinancing to a fixed rate mortgage is something many homeowners consider when they need to be able to keep meeting their monthly mortgage payment obligations.
Before You Go For The Fixed Rate
First, it's best to determine if your mortgage has a window of opportunity where you can change from adjustable to fixed without refinancing. This is the convertible option and some adjustable rate mortgages do offer it although these loans may come with higher costs at closing time. If you do not have this option then you will need to follow another course of action - look for a reputable lender in your area.
Doing your homework is something many experts recommend before any homeowner refinances to a fixed rate. This will involve researching current rates for fixed mortgages and getting a good idea of the range of affordable rates. This can be done by getting in touch with local lenders. A mortgage calculator can also be used to compare your current payments to what you may pay with a fixed rate. You may also want to read local home mortgage reports to determine what is the average fixed interest rate for loans in your area. Clearly, you want to be completely sure that the fixed interest rates available are less than what your adjustable rate is or will be.
Although using a mortgage calculator may not be the most accurate method to crunching these numbers, it will be enough to help you determine whether switching to a fixed rate will save you money or not.
What To Ask Lenders
If your mortgage is of the adjustable rate variety, you may be able to refinance to a fixed rate. Ask your current lender whether it would be possible to discuss this possibility. You could ask another lender, but it may be more difficult for you to refinance, as they won't be nearly as familiar with you as your current lender will be.
If you do speak with other lenders, be sure to keep notes on what kinds of deals they have offered or what they told you they would be willing to offer. This will help you to keep each company separate and make a more informed decision at the end of the day. One thing to be sure to ask is whether or not each lender is willing to roll in your closing costs with your refinance. This will mean that you don't have to worry about putting any of your own cash forward.
Another thing to ask is how much you would be charged in interest points. Include this information in what you gather from lenders as well. When you buy points, you can reduce your interest rate. While you will have to put your own money forward to purchase points, this could benefit you in the form of a lower interest obligation, as well as lower monthly payments.
Challenges When Refinancing To A Fixed Rate
Timing is a significant challenge for homeowners trying to refinance to a fixed rate loan. This is because it's important both to lock in at the lowest rate possible, as well as not acting to soon and losing a deal on a variable-rate mortgage. It may help to have analyst or banker advice on your side while you try to do this properly.
If your mortgage payments are already hard for you to handle, refinancing may be your solution, provided that your home has not decreased so much in value as to make this option impossible.
Clearly, you want to be completely sure that the fixed interest rates available are less than what your adjustable rate is or will be. Apply for quotes from the reputable lenders and then review them in order to make the most appropriate selection. Once you have done this, you can begin the process of refinancing your mortgage.
Article Posted In: Understanding the Refinance Process Refinance Home Mortgage