How to Keep an Adjustable Rate Mortgage From Going Up
When you first received your home mortgage, you had a choice between a fixed rate mortgage and an adjustable rate (ARM). An ARM usually offers a lower interest rate than a fixed rate loan. To keep an adjustable rate mortgage from going up, you could refinance the loan, or find out if your loan can be converted to a fixed rate.
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Things You'll Need
- A copy of your mortgage note, which has information on how often your rate will adjust
Instructions
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Find out how often your rate adjusts. Some loans adjust every month, some every three months, some annually or every three years.
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Check to be certain the new loan is really better than your old loan. Many banks have a very low introductory or incentive rate that lasts only a short amount of time.
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Know what the closing costs will be and factor that into the overall cost of refinancing the loan.
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Limit your choices down to three possible mortgage lenders, and then request a "good faith estimate'' from each one. A good faith estimate is a document which lays out the details of the loan, which will give your a better idea of what the closing cost to be paid refinance the loan.
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Tips & Warnings
Most ARMs have a limit on how high the rate can rise within a certain time period. These "rate caps" usually restrict the loan to rise no more than about two percentage points, and no more than six percentage points over the life of the loan.
Beware of low "teaser" rates that last only a short time.
Find a professional mortgage lender in your area and call them to discuss your loan options.
Find out from your bank if converting your loan to a fixed rate mortgage makes sense for you.
