When Is the Best Time to Refinance an ARM Loan into an FRM

If you have an ARM Loan, or an adjustable rate mortgage loan, then you might be considering transferring to an FRM, or fixed rate mortgage. This fixed-rate loan is considered to be a difficult loan to obtain, as it is a settled loan which does not rise and fall with the movement of interest rates. However, there are good reasons for deciding to change your ARM loan to a fixed rate mortgage.

When is the Best Time?

When you are deciding the best time to refinance your ARM loan, you need to consider not only the current ARM rate for your loan, but also the FIR, or the fully indexed rate. This is the interest rate of the ARM plus the margin. Knowing the FIR will allow you to figure out how the ARM rate will change in the future. You should then look for the FRM rate by asking lenders to calculate your market rate.

The Best Time to Refinance

Ideally, the best time to refinance is when both the ARM and the FIR rates are higher than your FRM rate. If this is the case, you should change your mortgage immediately. If both ARM and FIR are lower than the FRM, then refinancing now would cost you more money. If you find that the ARM is lower but the the FIR is higher, you should also wait to refinance your mortgage.