When should I do Option ARM mortgage refinance?Answer:
If you are having difficulties with payments, an Option ARM mortgage refinance is one way to go. Your existing loan will be restructured as a new Option ARM and your payments will get lower again - for as long as you convince the lender.
Option ARM Mortgage Refinance Compared To Other Refinance Options
Commonly, the Option ARM refinance will offer a very low rate 1 to 3% for the first several months, and then will increase with 5 to 7%, if you start with the minimum payment. You should also be allowed to choose to pay interest only, or select a fully amortizing plan for 15, 20 ... up to 40 years.
Comparing Option ARM with a pure Interest-Only loan, you are commonly allowed to pay principal but required to pay accrued interest only. This will be possible for 5 to 10 years, after which a recalculation will occur. This opportunity is a good alternative to an Option ARM refinance as you are not endangered by negative amortization.
If you already have an Option ARM loan which has adjusted already to a lot higher fully amortizing payments, it must be possible that you refinance into a new Option ARM, or a fixed rate loan. Refinancing into FRM will save you trouble in the future, but if your loan balance is too high for you to afford principal and interest payments, perhaps you could refinance into an ARM to win some more time.
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