A rate reset on an adjustable-rate mortgage (ARM) can be stressful. But thanks to historically low interest rates, there's a good chance your rate will actually go down if it's scheduled to reset in the next few months. If that's the case, you might be better off sticking with your ARM a little longer, despite the low rates on fixed-rate mortgages (FRMs).Interest rates on ARMs typically are calculated by adding percentage points to a rate index -- most commonly the 12-month London Interbank Offered Rate, or LIBOR. The rate index fluctuates, and the margin between your rate and the rate index is set by the lender and remains fixed for the life of your loan. The margin is often 2.75%, but can be higher if your lender considers you a risky borrower.
Don't Ditch That ARM Just Yet
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts
Every recommendation goes through 3 layers of intense scrutinyquantitative, fundamental and technical analysisto maximize profit potential and minimize risk.
More than 30 investing pros with skin in the game give you actionable insight and investment ideas.