Refinancing your home is a big decision. There are many things to consider in order not to land in a bigger debt. Interest rates for purchase of properties are at an all-time low this year. Some experts will probably recommend that this will be a good time for you to refinance your mortgage especially if you are currently on an adjustable rate mortgage. It can be a good idea if you check out the current interest rates and value of your property before you even decide to refinance your property. Based on your findings, you may have a clearer idea and be more prepared if it is the best time to convert your 15 year adjustable rate mortgage (ARM) to a lower 30 year fixed mortgage rate. With an adjustable rate mortgage, there is always a chance of the interest rate increasing in relation to the current index and margins. So when the interest rate is relatively lower to the current interest rate you are paying, some experts may think it is wise that you refinance your 15 year adjustable rate mortgage (ARM) to a 30 year fixed mortgage rate.
Generally, if the current interest rate is 2% lower than the rate you are currently paying, it is considered to be a good time to convert your ARM to a fixed mortgage. But that is not always the main thing you may want to weigh in before deciding to refinance to a fixed rate. There are other considerations that you might want to bear in mind. When interest rates are low, it is most likely due to an economic downturn. When the nation’s economy is slowing down, property values usually decrease as well. So it may not always be a good option to refinance your home based on the low interest rate alone. Additionally, if your property value has gone down, it might not be the best time for you to refinance. For example, if you refinance your home up to even 80% of the appraised value during the time when property value is low, the amount might still not be enough for you to pay off your original mortgage. That in itself can put you in a bigger debt situation that before. So it is always advisable that you weigh in your options carefully before deciding. Before you actually apply to refinance your home to a 30 year mortgage rate, you might want to pay off any late payments and improve your credit scores.
Due to the fact that refinancing may get you a lower interest rate than that of your initial mortgage, lenders are expected to be stricter and may screen every possible aspect of your credit history. So it is always wise for you to plan the right time for you to refinance. You might also want to pay off all your due payments on time. When lenders see that you are never late in making payments, you will inadvertently build up your credit score and improve your chances of being approved for a refinance. You would also be wise to check your credit scores from time to time and remove any errors because this will be an important aspect of your credit history in the eyes of your lenders. Generally it is a good idea to convert your 15 year ARM into a 30 year rate if you are sure that the interest rates are low and your property value is still high. Instead of always being on tiptoes worrying about increasing interest rates, converting your 15 year ARM to a 30 year fixed rate mortgage can significantly cause a change in your monthly payments and you will not have to worry about any increase on the interest rates. After all, a fixed rate will stay the same throughout the life of your loan. But like everything else in life, it is always wiser for you to consider all options before jumping in. So be smarter and learn all you can about refinancing in order to make a decision that may benefit you and your family.