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The fixed period on my ARM loan is expiring

The fixed period on my ARM loan is expiring - When the two or three year period on most ARM mortgages from "subprime" type lenders expire, your interest rate and payment will very likely go up here in 2006. The method used to calculate the new interest rate and payment is specified in a document called the Adjustable Rate Rider, however most work basically the same.

If the fixed rate on your ARM loan is expiring, you could be in for a case of payment shock.
The good news is if you've had an adjustable rate mortgage for the last 2 or more years, you have probably saved thousands of dollars that you would have paid with a fixed rate mortgage.
However, now is a good time to look at refinancing to a lower rate fixed rate mortgage or intermediate ARM.

Some Lenders sell the information of customers whose fixed period of ARMs are expiring.

In most cases your adjustment period begins the same time your prepayment period ends. You will most likely be recieving several solicitations to refinance by mail. If you like the work your mortgage broker did when you first got the mortgage it might be best to go to them for your refinance. They have all of your records on file already, they are fimilar with you and your situation already.

Many people will refinance their home mortgage loan into either a fixed rate mortgage or into another adjustable rate mortgage before their interest rate on their ARM, adjustable rate mortgage loan, is about to make its first adjustment. Refinancing your ARM loan can save you money from a big increase in your interest rate and monthly payment when interest rates are on the rise.

If you have misplaced your loan documents, you can sometimes look up the specific information on your Adjustable Rate Mortgage at the county courthouse. Look for the Adjustable Rate Rider, which details the terms of your adjustable rate loan (when the rate will adjust, what percentage it will adjust to, etc).

You can check your loan documents to find out exactly when your loan is set to adjust. This should give you time to prepare and know when you need to look into refinancing your loan.

Fixed Rate vs. ARM - There are many different options available when shopping for a mortgage, but one of the most basic choices potential borrowers face is the choice between a fixed rate or an adjustable rate mortgage.

There are benefits and drawbacks to each, and you should consider these when shopping for a mortgage.

A fixed rate mortgage has the advantage that the interest rate is fixed for the life of the loan. Your payments will remain stable, regardless of changes in the real estate or interest rate markets. Over the life of your loan, the interest rate market will fluctuate, and at some point, your interest rate will probably be below the current market. The lender assumes the risk of such market fluctuations in making the fixed rate mortgage for you, and in exchange, the fixed rate mortgage typically carries a higher rate than a comparable adjustable rate mortgage.

An adjustable rate mortgage (ARM) offers a lower initial interest rate than its fixed rate counterpart. The reason for this is that making a mortgage involves a large sum of money being lent over a long period of time, and therefore carries some level of risk for the lender. If you take on an adjustable rate mortgage, you are assuming some of that risk by allowing your interest rate to change with the market. The lenders profit margin is protected over the life of the loan, and therefore they can offer you a more attractive interest rate.

Mortgage loans with long fixed rate periods usually have higher interest rates. However, in certain interest climates, the short term rate is at the same level as long term rates. In such economic conditions, there is little to no difference in interest rates between an Adjustable Rate Mortgage (ARM) and a Fixed Rate Mortgage )FRM).

Both fixed rate and ARM loans can be "interest only". Typically, the interest-only period on a 30-year fixed rate loan lasts 5 years. On adjustable-rate mortgages, the interest-only period typically coincides with the fixed-rate period (if the loan is a 2-year ARM, the interest-only period is usually 2 years as well).

Most homeowner sell or refinance their homes within 5 years, therefore obtaining a fixed rate may not always be the best option. When you are looking to buy a new home or refinance your existing mortgage sit down with your mortgage professional to find out all of the advantages and disadvantages to both a fixed rate home loan and an adjustable rate home loan for your individual situation. Adjustable rate mortgages, also referred to as ARM's, can be highly advantageous when used in the right situations. Remember to, that with an adjustable rate mortgage your rate can also go down depending on the market conditions at the time of the adjustment periods.


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