Should I convert my Adjustable Rate Mortgage or Equity Line to a Fixed Rate Mortgage?
The answer can depend on a lot of factors but unless you are planning to pay off the loan in the next year or two, the answer is most likely a resounding YES!
Last month, the Federal Reserve raised the federal funds rate by a quarter of a percentage point, its 14th-consecutive rate increase since June 2004. Last month’s rate increase may not be the last. Newly confirmed Fed Chairman Ben Bernanke is now expected to raise rates at least one more time, by a quarter-point.
While short-term interest rates have been rising, long-term rates have been slower to follow suit. Alan Greenspan even referred to this situation as a "conundrum".
If you currently have an Adjustable Rate Mortgage or Home Equity Line of Credit now is the time to talk to an experienced Mortgage Planner about converting that loan to a Fixed Rate.
Can I refinance when my property is listed for sale?
Without large fees, a lender will not refinance your mortgage if your property is currently for sale. The economics don’t work for the lender. In most cases a lender only makes a profit on your loan after it has been on the books for more than a year.
A common response I get from borrowers is, “No problem, I’ll take my home off the market, refinance and then put the home back on the market”. Lenders are wise to this move and have requirements when they know a property has been recently listed for sale.
In general, lenders will allow a refinance if the property has been off the market for 3-6 months or if the new loan includes an early payoff penalty. A lender may also allow a refinance if the borrower has a compelling reason why they will not be selling the property, such as, a pending job transfer fell through.
Prior to selling any property, you should consult with a mortgage professional to determine if a refinance would benefit you before you list the property. You may be able to pull needed cash out of your property and lower your monthly payment, and possibly with no closing costs.
