When is it right for the client?
Many people took advantage of lower rate Adjustable Rate Mortgages (ARMs) several yrs ago and saved thousands in interest. But now that the fixed period is coming to an end, it is time to pay the piper. But what to do? Should the Homeowner refinance? Should they gamble on another ARM? Fixed rate?
First of all.... the homeowner needs to be honest with themselves. How long do they intend to be in the home? You see, there are real costs associated with doing a Home Loan. And although those costs can be rolled into either the mortgage or the rate.... people have to get paid. The loan officer doesn't work for free. The appraiser doesn't either. Documents need to be recorded at the courthouse, ect, ect, ect. And don't get caught up in the unscrupulous advertising of Zero Cost Home Loans. They don't exist!! There ARE COSTS. And those costs have to be paid. Now, there is usually no out of pocket expense as the fees can almost always be rolled into the loan if the homeowner has the equity. And the fees can be paid or reduced if the homeowner wishes.... by taking a higher interest rate(this is the wrong thing to do for most borrowers). But the costs are still there..... it either costs you fees which are rolled in or it costs you higher loan payments than you qualify for via the higher interest rate.
Now... SHOULD the homeowner refi? Maybe not. If the homeowner is expecting a job transfer or is ready to buy another home, they can almost always win by riding out the higher rates after the ARM adjusts. What time frame are we talking about? 6 months, 1 yr, 5 yrs? Well, at DallasLoanGuy.com we understand the importance of putting our clients into a loan that is right for them!! So, after getting pre-approved for a refinance, we can go back and make some 'breakeven' calculations to see if refinancing today makes sense. Giving the homeowner 'real numbers' that show how many months they would have to stay in the property before refinance would be a good idea. For some, the ARM adjustment is not significant enough to push the payment higher than today's fixed rates. Yet, others will be wise to refinance right away depending on future rates and how long they plan to stay.
DallasLoanGuy.com can peform a Free Mortgage Analysis for folks who would like answers to these and any other Texas Home Loan question.
Tom Burris
DallasLoanGuy.com
Dallas, TX
"A Home Loan For Every Texan"
Great post. It is true that not every ARM needs to refi. It is always on a case by case basis.
Dave
Tom: Thanks for the good information. I am trying my best to get better educated on the lending side of thigns.