Adjustable Rate Mortgage? Refinance Before It's Too Late

By Gabriel Traverso
Mortgage Credit Problems Columnist

Featured Home Equity Loan Provider
    • Get your Free Quote in Minutes!
    • Lenders Compete for your Business
    • Lock in a Low Fixed Rate Before Rates Increase!
    • Do you have the Lowest Rate Possible? Find Out Instantly!
Many homeowners in the past few years opted for an adjustable rate mortgage (ARM) in order to stretch their home-buying dollars and get into larger homes. If you are one of these borrowers, refinancing out of that ARM may be a smart long-term financial decision.

Knowing When to Refinance

Recent studies show that many homeowners chose an adjustable rate mortgage when a fixed-rate mortgage would have been a better solution. Some have ended up with mortgage payments that exceed their income, for others the picture is much worse. First American CoreLogic, a California-based real estate research group, recently released a study of adjustable rate mortgages. They examined 8.4 million ARM loans made between 2004 and 2006. Of these loans they project that 13% will result in foreclosures due to skyrocketing payments. The answer? Refinance your mortgage before it's too late.

Effective Mortgage Shopping

Homeowners with bad or poor credit need to work a little harder to get a good deal on a mortgage refinance. Lenders consider homeowners with bad credit to be more of a risk, so you will likely pay higher rates than someone with good credit. This makes shopping around even more important. Today, one best way to shop for a bad credit mortgage refinance is using the Internet. Online shopping allows you to get information from multiple lenders in much less time than calling or making appointments. You can submit your information and start the process without ever leaving your home.

Bad Credit Mortgage Refinance

If you have bad credit and an adjustable rate mortgage it is critical that you develop a strategy to cope with a rate increase if you get one. If you can't afford the increase in payments that an ARM carries you need to start shopping around for your refinance options. On the other hand, if your loan isn't adjusting for six or more months, you should try to use that time to improve your credit. When you need your new loan you may be able to secure better terms by waiting. However, waiting too long after your ARM resets and payments go up might make a difficult situation even worse--and your credit could suffer.

Wall Street Journal: Economy Can Withstand More Mortgage Foreclosures

Compare Refinance quotes in minutes

Property Type:
Credit Rating