Now is the Time to Refinance Your Adjustable-Rate Mortgage

By Richard Barrington
LoanPage.com Columnist

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Ideally, you would take out an adjustable-rate mortgage when mortgage rates were relatively high and then refinance into a fixed-rate mortgage after mortgage rates have fallen to their lowest levels. Since no-one has that kind of foresight, it is worth noting that now would be a pretty good time to refinance from an adjustable rate to a fixed rate mortgage. Even for adjustable-rate mortgage holders who have already been burned by rising mortgage rates, a refinance into a fixed-rate mortgage may be a sound financial strategy.

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Mortgage Rates: Once Bitten, Twice Shy

There's an old saying: once bitten, twice shy. Another way to put it is that the best thing about a mistake is what we learn from it. People who have seen their adjustable-rate mortgages reset to higher rates might regret that they didn't switch to a fixed-rate mortgage earlier. At this point, what's more important is guarding against further resets to higher mortgage rates. In other words, if you've been bitten by rising mortgage rates once, it might be a good idea to guard against being bitten again.

Budgeting: The Key to a Successful Mortgage

Chances are, over the course of a fifteen- or thirty-year mortgage, you'll see periods when mortgage rates are both higher and lower than they are currently. This uncertainty makes it impossible to budget for an adjustable-rate mortgage payment, since you don't know from one year to the next what that mortgage payment will be.

Since budgeting is a pretty fundamental component of a successful mortgage experience, it might make sense to take the uncertainty out of the equation. If you refinance to a fixed-rate mortgage, you will have set a payment level you can budget around for the remainder of your mortgage term.

About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.

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