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Should You Refinance Into an ARM After Bankruptcy?

When refinancing your Massachusetts mortgage after bankruptcy, you will be faced with a whole myriad of financing options. One of the most important decisions you will make involves choosing between a fixed rate mortgage and an adjustable rate mortgage or ARM.

Because of the low introductory rates being offered, it may be tempting to go with the ARM. However, it may not be the best decision. Here are a few things in particular that you will want to think about prior to refinancing into an ARM after bankruptcy:

Can You Afford It?
Right now, Massacusetts interest rates on ARM refinance loans are low—the current rate on an ARM refinance is 5.41 percent. Unfortunately, this rate only lasts for so long. If average interest rates rise after your introductory period ends, you will be faced with a higher rate and a higher mortgage payment. You need to make sure you can afford the payment at its highest prior to taking on this type of Massachusetts mortgage refinance after bankruptcy.

Will You Be Moving Soon?
The average Massachusetts resident keeps their first home for six years before buying something else. If you think you will be moving in the near future, you may be better off going with an ARM refinance after bankruptcy. This way you can take advantage of the low rate now and know that you will not have to worry about it later.

Are There Prepayment Penalties?
Often times when taking out a Massachusetts mortgage refinance after bankruptcy, lenders will try to add a prepayment penalty to your loan. You should enter into an ARM that has a prepayment penalty with caution. If you decide an adjustable rate mortgage isn’t for you, it could cost you a lot of money to refinance again.