In deciding whether to refinance an ARM you should consider these questions:
1. Is the next interest rate adjustment on your existing loan likely to increase your monthly payments substantially? Will the new interest rate be two or three percentage points higher than the prevailing rates being offered for either fixed rate loans or other ARMs?
2. If the current mortgage sets a cap on your monthly payments, are those payments large enough to pay off your loan by the end of the original term? Will refinancing a new ARM or a fixed rate enable you to pay your loan in full by the end of the term?
What Are The Costs of Refinancing?
The fees described below are the charges that you most likely to encounter in a refinancing.
Application Fees
This charge imposed by your lender covers the initial costs of processing you loan request and checking your credit report.
Title Search and Title Insurance
This charge will cover the cost of examining the public record to confirm ownership of the real estate. It also covers the cost of a policy, usually issued by a title insurance company, that insures the policy holder in a specific amount for any loss caused by discrepancies in the title to the property.
Be sure to ask the company carrying the present policy if it can re-issue your policy at a re-issue rate. You could save up to 70 percent of what it would cost you for a new policy.
Because costs may vary significantly from area to area and from lender to lender, the following are estimates only. Your actual closing costs may be higher or lower than the ranges indicated below.
