Fix the Interest Rate

What is the Benefit?

A rate and term refinance is a great way to get out of an adjustable rate mortgage and fix the interest rate so the rate and monthly payment will not adjust or change in the future. The homeowner has the ability to change the term (to a 30, 20, or 15 year, etc.) and change the payment accordingly (lower payment, pay more principal, etc.).

Generally, there are two ways to fix the interest rate from an adjustable rate:

N

The first way is to do a traditional fixed rate loan where the loan is fixed for the entire term. The homeowner never has to worry about a change in the monthly payment due to the interest rate adjusting in the future.

N

The second option would be to take a new adjustable-rate mortgage with an initial 5, 7, or 10-year fixed period. The homeowner does not have to worry about a change in the monthly payment for the next 5, 7, or 10 years.

This is ideal for homeowners who know that they will own their home for only another 5-10 years and will sell (maybe to upgrade to a larger home, downsize to a smaller home, relocate to another city or state, etc.).

This option may also be a good choice for homeowners with an existing adjustable-rate mortgage that is about to adjust from the initial fixed rate period and they wish to get into another adjustable rate loan with a new 5, 7, or 10 year initial fixed period.

This is common with homeowners with higher loan balances or Jumbo loans because adjustable-rate mortgages are typically 0.5-1% lower compared to a 30-year fixed rate and therefore have a much lower payment.