Refinance Your Adjustable Rate Mortgage

Refinance loans
Lower your rate at the beginning of the loan.

An adjustable-rate mortgage (ARM) features an initial period with a fixed interest rate followed by an adjustable phase during which the rate can change. The periodic changes are usually tied to a benchmark, such as the London Interbank Offered Rate (LIBOR) or Treasury index. ARMs typically feature lower initial interest rates and lower monthly payments for the first few years of the loan, and then they adjust upward (or even down) based on market conditions and loan terms.

Evergreen Home Loans™ currently offers a 5/1 ARM (sometimes referred to as a fixed-period ARM), where the interest rate is fixed for the first five years of the loan and then adjusts annually for the remainder of the loan term.

Refinancing a fixed-rate loan to an ARM is less common than refinancing to a fixed-rate loan from an ARM. Still, there might be circumstances when refinancing to an ARM makes sense, such as if you’re planning to sell your home in a few short years.

To determine if an ARM is right for you, consider these advantages and disadvantages.

Advantages:
  • An ARM offers a lower initial monthly payment compared to a fixed-rate loan.
  • It is a possible way to save money if you plan on living in your home for only a few years or plan to refinance after a few years.
  • You can manage higher interest rates and payments later as your income grows to meet those expenses.

 

Disadvantages:
  • It's subject to interest rate changes that are out of your control.
  • It’s unpredictable. Your monthly mortgage payment can fluctuate year to year throughout the loan term. 
  • Refinancing is more likely than with a fixed-rate loan.

We believe homeownership should be an attainable goal and offer a variety of home loan programs with competitive rates to meet your needs. Contact an Evergreen Home Loans officer to explore your financing options. 

Frequently asked questions:
Can you save money by refinancing to an ARM?

Saving money by refinancing to an ARM is dependent on a few factors. What are interest rates doing? What’s your current loan term? How long are you planning on keep your home? Overall, it’s an advantage when interest rates are low.

Can you refinance an existing ARM to another ARM?

It may be possible to refinance from one ARM to another. It’s always in your best interest to compare advantages and disadvantages, along with the interest rates and costs of a new ARM, to determine if refinancing is the best decision.

How would someone determine if an ARM is the right choice?

There are a few things to consider when determining if an ARM is right for you, including: how much can you afford to pay monthly, can you afford a higher payment if interest rates rise, and how long do you plan to live at the property? Overall, an experienced loan officer can help you navigate your decision.

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