My husband and I have a 5/1 ARM that is three years old. We are getting nervous and want to refinance our home with a fixed-rate mortgage. We have locked in a 5.375 percent rate with our local credit union. Our balance is $229,000 on our home, but it is worth approximately $400,000. Our payment will be a little less, but our present interest rate is 5 percent, so interest will be a little higher. My husband is in the construction business and, as you know, it is greatly affected by the economy. If we wait, we could possibly sell a piece of land and pay off approximately $90,000 on our loan, making our payment lower. Are we jumping the gun by refinancing early? Do you have any suggestions?
Lynn

Lynn,

The adjustable-rate mortgage and the industry your husband is in have you feeling financially insecure. So, let’s take some of the risk out of your situation. Refinance now. The thing about adjustable-rate mortgages is that they do adjust, but almost never down — they only go up. Get a 15-year fixed-rate mortgage and pay it off as soon as you can. Your interest rate may be a little higher, but the fixed rate will eliminate at least one element of the uncertainty you are feeling.

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