Refinancing With An Adjustable Rate Mortgage Pros And Cons

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Refinancing With An Adjustable Rate Mortgage Pros And Cons

Adjustable Rate Mortgages, also called ARM, have received some bad press lately. There are, however, as many advantages to refinancing with an ARM as disadvantages. If your current loan is a fixed rate home loan, and you are considering refinancing, an ARM loan might be worth your while. Depending on your situation, you could save money on repayments and get a better interest rate.

An adjustable rate mortgage has significantly lower interest rates than a similar fixed rate loan at any given time. The rates on an ARM change over the duration of the mortgage loan, based on current markets and trends. Lenders use an index to determine what the rate on an ARM will be. The fixed rate loan will never change interest rates, resulting in a stable, but possibly higher repayment cost. The biggest benefit of refinancing your existing mortgage with an adjustable rate mortgage is the possible saving from a lower interest rate. Though they seem insignificant, as small a difference as half a percent between interest rates can be equivalent to thousands of dollars spent or saved.

When you refinance with an...

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