High Interest Rates Mean Mortgage Refinancing According to GuideToLenders.com

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A recent GuideToLenders.com survey indicates that many homeowners are considering refinancing their homes as a result of rising interest rates. Sixteen percent of respondents answered that they are strongly considering converting an adjustable rate mortgage to a fixed rate mortgage indicating a possible trend for 2007.

A November survey by GuideToLenders.com -- an online consumer resource providing more mortgage refinancing information for homeowners--found that homeowners are planning ahead for possible interest rate hikes. Sixteen percent of the survey respondents are considering converting their adjustable rate mortgage (ARM) to a fixed rate mortgage (FRM) indicating a likely trend for 2007.

"Rising interest rates might be great news for your savings accounts, but they're not such great news for anyone whose mortgage rates adjust with the rising tide," The Motley Fool, a reputable online resource for investing, stock research, and personal finance reports. "In fact, adjustable-rate mortgages appear to be putting a financial strain on some homeowners."

Adjustable rate mortgage reset rates expected to total nearly two trillion dollars in 2007; the latest Weekly Mortgage Application Survey published by the Mortgage Bankers Association shows that mortgage refinancing applications have hit their highest levels in over a year. The seasonally adjusted Refinance Index increased by 15.8 percent and is at its highest level since September 2005, according to the Mortgage Bankers Association.

The risks associated with an adjustable rate mortgage in a market where interest rates are steadily rising are causing many to consider converting to a fixed rate mortgage. GuideToLenders.com (http://www.GuideToLenders.com) suggests the following pros and cons when choosing either an adjustable rate mortgage or a fixed rate mortgage. Keep in mind, however, mortgage refinancing costs may outweigh the differences in payments in the long run.

Adjustable Rate Mortgages (ARM)

Pros

  • Lower initial interest rate means lower monthly payments.
  • Monthly payments drop with interest rates.
  • Lower initial interest rate and payments make it easier to apply for an ARM.

Cons

  • Payments increase with interest rate hikes.
  • Payments can become unaffordable if interest rates rise dramatically.

Fixed Rate Mortgages (FRM)

Pros

  • Monthly payments will remain the same for the next 15 to 30 years despite hikes in interest rates.
  • Locked in interest rates mean payments won't suddenly become unaffordable.

Cons

  • Higher interest rate and payments make it harder to apply for a FRM.
  • Interest rates can decrease significantly over time meaning lower payments may be available through an ARM.

GuideToLenders.com anticipates that many homeowners fearing sticker shock will turn to mortgage refinancing to lower monthly payments in 2007. GuideToLenders.com offers a variety of free tools and tips and provides an easy way to find the best refinancing options whether it is an adjustable or fixed rate mortgage (http://www.guidetolenders.com/calculators/index.jsp).

GuideToLenders.com is a consumer resource featuring guides on how to find the right lender or broker who can provide options to best suit consumers' needs. Products offered by the lenders/brokers include new home financing, refinancing, home equity line of credit, and debt consolidation loans. To find out more, visit http://www.GuideToLenders.com. For people looking to sell their home or buy a new home, GuideToRealty.com (http://www.guidetorealty.com) features detailed information about real estate agents and local market and demographic information in more than 2,500 cities nationwide.

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ROBERT LAPIC
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