Renewing an Adjustable Rate Mortgage

If you have chosen to finance your home purchase through an adjustable rate mortgage, then you're going to be faced with renewing or refinancing, at the end of the rate period. This may be every year, every three years, or every five years.

As the time for renewal approaches, consider what the prevailing rates are, and whether it is going to mean a significant rise in the amount of your monthly payments. Compare your institution's ARM rates with other lenders, and against those of a fixed mortgage. Small savings over the term of your next ARM period, or even the full term of the loan, can mean more room in your budget for other necessities.

If there is a cap on payments for your current ARM plan, make sure the payments are large enough to allow you to pay off the loan in full, by the end of the term. If they are not, consider a new ARM mortgage or fixed rate mortgage that will allow you to clear the debt completely, with no "leftovers" when the loan expires.