This actually could be a very interesting question when you consider the different variety of ARM loans out there. If you have a sub-prime or alternative documentation loan, it may definitely be time to refinance that loan because of the terms that you have. However, if you have a conventional (conforming) ARM, it may not be the time to refinance. But who do you ask this question of in the Eugene/Springfield Oregon area? Hopefully someone you trust to give you a straight answer and knows what he is talking about.
Adjustable rate mortgages (ARMs) all have the same basic terms. They are fixed for a specific time, 1 month for the “Option ARMs” and up to 10 years on the intermediate ARMs. At the end of that period, the interest rate changes based on some pre-set parameters. The rate can change based on the Index plus the Margin. For instance if looking at a change today, if your index is the 1 Year LIBOR and your margin is 2.25% (fairly common on conforming ARMs), then today your rate could not go higher than 0.854 + 2.25 or 3.104. Now if your current rate is 5.5% and you have a 2-2-6 loan, the rate would drop to 3.5% which is the maximum movement up or down with this type of loan.
The interesting thing here is that the rate would drop. Are you in that situation? However, some loans have a floor which means they will not drop below a certain interest rate. Others have a very high margin and even with a low index will still be higher than market rate. Please note, without looking at the original loan documentation, it is impossible to tell you what your loan will do.
But, if you are looking for someone in the Eugene/Springfield Oregon area that can look at your documentation and then recommend a reasonable way to proceed, give me (Fred Chamberlin) a call today and let’s discuss your options. You can reach me at 541-342-7576/541-221-3455 cell or by e-mail. Alpine Mortgage Planning is located at 1200 Executive Pkwy., Ste. 100, Eugene OR 97401. It is important that you get good information before jumping into a refinance. Some ARMs are not as bad as they have been portrayed in the media. Some are! Give me a call today and let’s find out about yours.