Do you have an adjustable rate mortgage? Why have you not switched to fixed rate?

Answer 1

No. Adjustable rate mortgages are for people who can't afford the property they are buying. The reason these people can't switch to a fixed rate now is because they owe more than the house is worth so no lender wants go give them an unsecured loan. Also the monthly payments are probably more than they can afford. That is why they got an adjustable in the first place.

Answer 2

Every situation is unique.

I personally have customers who I helped with a 10 year ARM about four years ago at rates in the 4's. They don't anticipate being in their home 6 years from now and even if they are, their rate would increase significantly if they refinanced into a fixed rate today. With the adjustment caps on their particular ARM, they won't be above today's prevailing rates for 8 years. In the meantime, they are paying way more towards principal today in their old lower-rate loan, than they would if if they refinanced and were put all the way back to the beginning of a loan repayment period - when almost everything is going to interest. If I were like many of the "mortgage experts" out there who just came down with the last drop of rain, I'd be telling them YOU MUST REFINANCE INTO A FIXED RATE MORTGAGE IMMEDIATELY! But I've talked with them, they've reviewed their circumstances and made their own call to stay where they are at.

I'm not promoting ARMs or saying that they are the right answer for everyone, every time. As a matter of fact in today's market there is practically no reason to go with an ARM, because the rates are not appreciably lower than fixed rate mortgages.

Everyone's situation is unique, everyone would do well to have a trusted mortgage professional helping them through the morass that is mortgage financing, and no one should take their financial advice from the headlines of today's media hype.