An Adjustable Rate Mortgage, commonly referred to as an â??ARMâ?, is a type of mortgage regulated by the government with caps on charges. The interest rate on the note of these types of mortgages is periodically adjusted based on an index which mirrors the cost to the lender of borrowing on the credit markets. Some common indexes are the rates on 1-year constant maturity trust (CMT) and the London Interbank Offered Rate (LIBOR).

Essentially, adjustable rates transfer part of the interest rate risk from the lender to the borrower. This way, the borrower benefits if the interest rate falls, but loses if the interest rate increases. The borrower also benefits from reduced margins to the underlying cost of borrowing. If you currently have one of these types of loans and it is reaching its point of maturity, you may be trying to decide whether or not to let it roll over or refinance at a fixed rate. The â??catch-22â? is that, depending on which index you are tied to, if it increases so will your interest rate. The best way to make a decision is to keep track of the index your ARM is tied to and, a few months out, if the rate is low, it may be in your best interest to let it roll over. Even more so, if you are only planning on being in the house only a few more years, your closing costs on a refinance in that situation would be high due to State of Florida taxes. In summary, it comes down to knowing your mortgage and keeping track of where you are at with your loan and interest rates. If refinancing looks like it will save you money because your ARM index is on the rise, and your planning on being in that home a while, then that may be a better option. Don't hesitate to give us a call at (321) 397-4420, so one of our qualified loan officers can help you go over your options and choose the one that is right for you.