Before you refi that ARM, consider this.

My banker called the other day to talk to me about my Adjustable Rate Mortgage (ARM). He knew I was about to get a letter with my new interest rate and he was sure I would want to think about refinancing at a fixed rate.

Not necessarily. True, the ARM went up 1.75% to 6.5%, and a fixed rate for the type of mortgage I have would be roughly a quarter to a third of a point lower. BUT, think about these facts:

The Fed has pretty much telegraphed that they are going to stop raising interest rates; so this is probably the end of my annual ARM increases.

There are fees and paper work associated with any refinancing and it takes a while to save enough to pay them.

If rates start to go down again when I have a fixed rate (and that would not be unusual) I will have to do another refi, with all the expense and paper work, to lower my interest rate. If I stick with the ARM it will go down automatically.

That has already happened once with my mortgage. I started with a rate over 6%, but as interest rates dropped, so did my ARM. At one point it was down to 2.75%. I never would have kept up with those drops had I contually refinanced into fixed mortgages.

I saved a lot of money with my ARM over the years. It could happen again. And all I have to do is nothing.

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