Refinancing a Fixed Rate Mortgage

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Refinancing a Fixed Rate Mortgage

Postby Tristan » Mon Apr 12, 2010 11:38 am

I'm looking to refinance my fixed rate mortgage. It appears that I can get a very low variable rate for a few years, and then I would need to refinance again to lock in the fixed rate. This idea is a bit of a gamble, as I don't know what rate I'd be locking into in the future. I am very hesitant to try for that reason. Does anyone know anyone who has done this? How did it work out?
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Re: Refinancing a Fixed Rate Mortgage

Postby Alex Chris » Thu Aug 26, 2010 12:23 pm

Simply, a fixed rate loan cannot change over the life of the loan. Thus your principal and interest payment will remain the same. The peace of mind of knowing your loan terms will not change is the most popular reason a fixed rate is chosen. With a variable rate loan, you risk having your mortgage payment increase when certain indexes in the marketplace rise higher than what they were at the onset of your loan. Historically, when you apply for a mortgage loan, variable rate loans are more attractive in the short term, since they typically have a lower interest rate for the initial period. The loans I refer to, called Hybrid ARMS, typically have a period of 1, 3, 5, 7, or 10 years in which the rate is fixed. After that period expires, the rate is subject to current market conditions (this is when the rate can rise or fall depending on the index upon which the loan is based). The factors to consider before choosing a variable rate loan over the security of a fixed rate loan are:

1. How long do you expect to own your current home?
2. How much is the difference in your monthly payment on a variable rate verses the fixed rate loan?
3. How prepared are you financially to adapt to an adjustment in the rate, if you were to hold the loan past the initial fixed period?
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Re: Refinancing a Fixed Rate Mortgage

Postby kindred » Tue Feb 08, 2011 4:03 pm

If you'll just be living in the house a few years, refinancing to the lower-rate ARM is a good option. However, if you've been paying off the original loan for a long time, refinancing is not advisable as you will lose equity in proportion to the amount you borrow over and above the remaining loan amount. But with rates currently rising and dropping every time, opting for a fixed-rate plan is a better option, even if you only plan to stay in the house for a few years.
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Re: Refinancing a Fixed Rate Mortgage

Postby Maralyn » Wed Jun 08, 2011 11:57 pm

Hi,
Refinancing to the lower-rate ARM is a good option. However if you've been paying off the original loan for a long time, refinancing is not advisable as you will lose equity in proportion, to the amount you borrow over and above the remaining loan amount.
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Re: Refinancing a Fixed Rate Mortgage

Postby ZoriWser » Wed Nov 07, 2012 7:16 am

The opportunity to re-finance a home loan at a reduced interest amount is sure to get a home owner's interest. But it's not always the right choice.
Having boasting privileges at the community eat outside isn't a reason to re-finance. Instead, it's good to put some thought behind the moment of your choice.
Multiple refinancings can decrease your overall financial benefit. Re-financing individuals who always move to the next low amount pay a significant price by making a pathway of settlement expenses in their awaken.
In some situations, a home loan re-finance is practical. In other situations, it may be more sensible to keep with your present home loan.
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