Frequently Asked Question: Adjustable rate mortgages: How do you negotiate the adjustment?
Q: What is the best way to proceed if your adjustable rate loan will come up for an adjustment next January? We want to get this settled as soon as possible, and not wait until the last minute. Are you required to refinance, or does the bank simply notify you of the new interest rate? Can you begin negotiations early, and try to get a better deal?
A: When you have an adjustable rate mortgage, your interest rate will adjust at predetermined times as set forth in your Adjustable Rate Rider on your mortgage. The frequency and amount of change in the interest rate are spelled out in your mortgage. So, there's nothing to negotiate.
Your rate is set by a margin (fixed) and an index. All adjustable rate mortgages have an adjusting interest rate that is tied to an index. The interest rate change will be based on the value of the index at the time of change.
If you do nothing, your lender will notify of the change in rate and payment prior to the scheduled change so you will know what your new payment will be. If might behoove you to find out sooner than later as to what you might expect that new rate will be. If it will be too high for your budget, you may want to consider refinancing now while rates are still historically low.
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