Fixed Rates Versus Adjustable-Rate Mortgage (ARM)
When you buy a mortgage you have the option to have either a fixed rate or an adjustable rate interest plan. Fixed rates will stay the same for the lifetime of the loan. Adjustable rates will change from time to time.
Usually, ARMs start lower than fixed rates but can climb higher or fall lower. So, with an ARM you can either save money or risk paying more money in the long term.
On the other hand, because fixed rates stay the same, you have the security of always paying the same amount. However, you also lose the potential benefit of saving money if your interest rate falls.
Considering which type of mortgage rate you prefer is an essential step when considering refinancing.
Is refinancing a home economical?
To answer this question, you need to ask yourself if you can recover the closing costs of buying a new mortgage. If you can save one percent of your current rate annually by refinancing then refinancing will be a good option for you.
Another thing to note is how long you plan to stay in the house. If you’re planning on moving out in the next three years, it may not be worth the costs of refinancing. But, if you plan to stay in the home for more than a few years, then refinancing may give you more benefits.
Is it a good time to refinance a 30-year fixed mortgage?
It depends on what you want to do. Usually, it’s not a good idea to refinance a 30-year mortgage if you’ve already been making payments for a few years. When you buy a new 30-year mortgage, what you’ve paid off does not carry over. For example, if you’ve already made payments for 5 years, then buy a new mortgage, you’ll still have to make all the payments for the next 30 years.
However, if you’re looking to refinance and get a 15-year mortgage in Tennessee, the mortgage rates as of September 2020 are among the lowest we’ve seen in the past few years. 15 year fixed mortgage rates also tend to have more favorable rates.
Is it a good idea to refinance with a current lender?
For the most part, it’s usually a good idea to try to refinance with your current lender. Because you’re already an established client, you might be able to avoid paying higher closing costs.
However, there can always be better deals out there, so don’t be afraid to explore your options.