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
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