Is Your Adjustable Rate Mortgage Loan At Risk?

If you purchased your home within the past two or three years, there is a very good chance you used an Adjustable Rate Mortgage loan. In 2005 alone, one out of every three mortgages had an adjustable interest rate. When used correctly, these loans offer lower payments and greater flexibility for borrowers. When abused, Adjustable Rate Mortgages can lead to financial disaster. Here are several tips to help you evaluate your Adjustable Rate Mortgage and decide if refinancing is right for you.

There are two important factors to every Adjustable Rate Mortgage. The first is the financial index your loan is tied to, and the second is the mortgage lenders margin. This margin is the markup your lender adds to the index when resetting your loan. The markup typically runs between two and five percent. If you took out an Adjustable Rate Mortgage and are due for a reset this year depending on your index you could be paying as much as eight percent by years end.

When you take out an Adjustable Rate Mortgage you often find yourself paying several different interest rates. These loans frequently start out with an ultra-low rate known as a teaser. This rate might be valid for as little as one month before the lender resets to your contract rate. If you have one of these mortgages it is extremely important to find out how frequently the lender adjusts your loan and when the next reset takes place.

Another important aspect of your Adjustable Rate Mortgage are the periodic and payment caps. Periodic caps limit how much your mortgage rate can change when the lender resets your loan. Payment caps limit how much you monthly payment can change during each reset. There are also lifetime caps that limit how much both can change over the entire duration of your loan. Caps are important safety features that need to be structured correctly to avoid negative amortization with your loan.

Should You Refinance Your Adjustable Rate Mortgage?

Financial advisors and industry experts agree that there are problems looming for Adjustable Rate Mortgage holders due for reset in the next two years. How do you know if your mortgage is headed for trouble? Here are several warning signs to help you decide if refinancing is right for you.

I. Is your loan scheduled to reset this year? If so, check the current value of your index and find out what your lenders margin.

II. How long do you plan on keeping your home? The longer you plan on keeping your home, the more sense it makes to refinance the loan.

III. Are you concerned about your bills and mortgage payment? If youre having trouble paying all your bills now, what will you do if the payment goes up? Refinancing before you have a problem could stabilize your budget.

IV. Does your mortgage have a prepayment penalty? If your mortgage has this penalty you could be charged a hefty fee when refinancing. Check your loan contract to make sure you will not have to pay this penalty.

You can learn more about refinancing your Adjustable Rate Mortgage, including expensive pitfalls to avoid with a free mortgage tutorial.

To get your FREE six-part Mortgage Refinancing Tutorial, visit RefiAdvisor.com using the link below.

Louie Latour specializes in showing homeowners how to avoid costly mortgage mistakes and predatory lenders. To get your hands on this free video tutorial: \"Mortgage Refinancing - What You Need to Know,\" which teaches strategies for finding the best mortgage and saving thousands of dollars in the process, visit Refiadvisor.com.

Claim your free mortgage refinancing tutorial today at: http://www.refiadvisor.com

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