Why Are Americans Afraid of ARMs?

Despite all of the media blasting Adjustable rate Mortgages (ARMs), and the fear of foreclosure if you don't refinance, ARMs may actually be a better deal for you, especially now that mortgage rates are headed higher again.

That's right, I will be the first to tell you if an ARM is better for you and that you shouldn't refinance (unless of course it is your best interests overall).  With LIBOR and CMT down, what most prime ARMs are based on, the fully indexed rates may be even lower than the recent lows on the 30-year fixed.  And guess what, those indexes will likely go at least a little lower in the near future.

So why are so many switching to fixed rates right now.  In fact, Freddie Mac reported yesterday that 92 percent of Americans with 1-year ARMs refinanced to a fixed rate, and 89 percent of those with hybrid ARMs did the same during the 4th quarter of 2007.  So, they were rushing to refinance from an ARM to a fixed at a time when their ARMs could be going lower.  Make sense?

Of course, fear of where they will be next year or beyond can drive people to the wrong decisions.  The media, your friends, neighbors, family, even Gene Simmons will probably tell you you need to refinance and get a fixed rate mortgage instead.  So, it begs to question whose advice your going to follow.

Don't count on most mortgage professionals either, as most are hurting financially themselves and may put their interests above yours.  There are several I would highly endorse, such as Brian Brady, Rhonda Porter, and a few others who have shown their ethics to be above all others.  Even financial planners sometimes miss the mark. 

The best way to ensure your financial success, including getting the best mortgage product for your overall financial situation is to do your research and work with a team of professionals that can guide you properly.