Current home refinance rates could save you a bundle if your existing rate is high or about to change. An adjustable-rate mortgage (ARM) has a rate that changes after a certain period. The rate may be low for an initial period, such as three to seven years, and then adjust to match current market conditions.
Initial ARM rates are usually much lower than fixed-loan rates. Unfortunately, ARM rates can soar much higher than original or refinance rates once they adjust. Lenders use different formulas, and the housing market influences what the new rate will be. An ARM can be a gamble.
You can refinance to another ARM, or you can switch to a fixed-rate mortgage. However, it is important to consider the costs to refinance.
If you switch to a new ARM every five years, you might pay more in fees than you save in interest charges. Refinancing fees can include the following:
- Application fee
- Appraisal fee
- Title search fee
- Title insurance fee
- Attorney fees, in some states
Each time you refinance, you will need to pay these costs.
A low-fixed refinancing rate can lower your monthly payments for years to come. Switching to a fixed rate can save you the cost of refinancing down the road.
You can look into the best mortgage refinance rates online or with your current lender if your ARM is about to change and you are concerned that your low rate will suddenly skyrocket.
As of writing, home refinance rates are among the lowest they have been in more than a decade.