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Adjustable-Rate Mortgage Refinancing in the Carolinas

Are you looking to refinance in North Carolina or South Carolina? If so, Dash Home Loans can help you secure the interest rate and loan terms you’re after. We evaluate every homeowner’s circumstances with a sharp eye, choosing a refinancing option⁴ that suits their needs. For some, that’s an adjustable-rate mortgage – “ARM” for short.

With an ARM, you can expect super lower interest rates to start. Then, after a set period of time, that interest rate will adjust. This flexibility allows homeowners to save hundreds – if not thousands – of dollars at the beginning of their home loan³ term. Keep reading for more on this dynamic lending tool.

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What Is an Adjustable-Rate Mortgage?

As a homeowner, you’re surely familiar with interest. But in case you need a quick refresher, interest is the cost of borrowing money. It’s expressed as an annual percentage rate and may be higher or lower depending on factors like your credit score, how expensive your house is, and the loan term.

In a fixed-rate mortgage, the interest rate remains the same throughout the life of the loan. But with an ARM, the interest rate varies. The initial rate is called the “teaser” rate because it’s set below the market rate (pretty sweet, right?). This rate remains fixed for a specific period of time – anywhere from one month to 10 years.

After the initial term, your interest rate will adjust based on market forces. As a homeowner, you can expect your rate to change on a yearly or even monthly basis.

Understanding NC & SC Adjustable-Rate Mortgages  

Okay, now we’re going to launch into the specifics of ARMs. If things get too confusing, just give us a shout. As a refinancing lender in North Carolina and South Carolina, we’ll connect you with a Mortgage Coach who can explain things face-to-face.

But generally, homeowners are golden once they understand these concepts:

  • Index: An index is a benchmark interest rate that reflects general economic conditions. This metric changes based on the market.
  • Margin: The ARM margin is a fixed interest rate that’s added to your variable interest rate. The margin is set in your loan terms and will never change.
  • Initial & Periodic Caps: The initial adjustment cap establishes how much your interest rate can rise or fall the first time it adjusts. This protects both the lender and borrower by preventing the interest rate from skyrocketing or hitting rock bottom. Periodic caps also safeguard homeowners by limiting how much the interest rate can change during an adjustment interval.
  • Lifetime Cap: The lifetime cap refers to the maximum interest rate a borrower could ever pay during the life of their loan.

An ARM is expressed using two numbers. The first number indicates the length of time you’ll benefit from the fixed “teaser” rate. The second number refers to the duration of the variable rate. If you went with a 2/28 ARM, for instance, you’d have a fixed rate for two years followed by a floating rate for 28 years.  

The cap structure for an ARM is also dictated using numbers. For instance, a 5/1 ARM with a 5/2/5 cap structure means that your rate will remain unchanged for the first five years. In the sixth year, your rate can increase by a maximum of five percentage points (the first “5”). In the years following, rates can increase by a maximum of two percentage points, as indicated by the second number. However, the loan’s interest rate can never increase by more than 5%.

Mortgage Refinancing in the Carolinas

Are you feeling better after that crash course? If so, let’s talk refinancing. When a homeowner refinances their mortgage, they’re essentially trading in their old loan for a new one. This new, shiny mortgage may offer:

  • Lower interest rates
  • An adjusted loan term
  • A lower monthly payment
  • The ability to cash out your home’s equity 

The most common type of refinancing is a rate-and-term refinance, which changes the interest rate and/or term of an existing mortgage. Switching from an ARM to a fixed-rate mortgage is a very common example of a rate-and-term refinance. In this situation, a homeowner may want to lock in a low interest rate or they may want the stability of a fixed-rate loan.

Though it’s less common, switching from a fixed-rate mortgage to an ARM is also an option. Refinancing to an ARM is beneficial if you want to save money in the short term and invest it elsewhere. It’s also a great option for borrowers who don’t plan on living in the same spot for an extended period of time.

Why You Should or Shouldn’t Refinance to an ARM 

At this point, an ARM probably seems like the best thing since sliced bread. We get it. After all, this mortgage lending tool can lower your interest rate and monthly mortgage payments (initially, at least). But it’s not suited for every homeowner.

Let’s start with the positives. You should consider refinancing to an ARM if:

  • You want a low interest rate immediately 
  • You want to sell your home in the next few years
  • You expect a pay increase soon
  • You think interest rates are on a downward trajectory 

However, you should steer away from an ARM if:

  • Your income is unpredictable 
  • You plan on paying your mortgage off early
  • The cost of refinancing is high 

Unsure if an ARM refinance is right for you? Contact us online or dial 704-912-0020.

As one of the speediest and friendliest refinance lenders in North Carolina and South Carolina, Dash Home Loans can hook you up with a knowledgeable Mortgage Coach in a jiffy.

ARM Refinancing Requirements in the Carolinas

Does an ARM refinance sound like your cup of tea? Sweet! Now, you’re probably wondering whether or not you’re eligible. Though refinancing requirements vary from lender to lender, homebuyers interested in an ARM refinance in North Carolina and South Carolina must typically have:

Not sure if you qualify? Contact us today to talk with one of our friendly Mortgage Coaches.
  • A credit score of 620 or higher. Homeowners with less-than-perfect credit may still qualify, depending on the lender. 
  • At least 20% home equity. This percentage is calculated by dividing your current mortgage balance by your home’s value. An appraisal is needed to determine the latter.  
  • A debt-to-income ratio under 50%. To determine your debt-to-income ratio, add up your monthly debt payments and divide them by your gross monthly income.
  • Owned the home for at least six months. In some cases, however, there is no waiting period.

Again, your lender may have more specific standards. Your Mortgage Coach at Dash Home Loans can walk you through these requirements.

How to Refinance From a Fixed-Rate Mortgage to an ARM

Since you’ve already gone through the home financing process once, refinancing to an ARM should be easy peasy. You can choose to rock with your original lender or you can go with a different lender altogether. But since certain mortgage lenders in North Carolina and South Carolina offer better rates, we suggest you shop around.

Once you pick your lender, you’ll need to gather required documentation like W2s, pay stubs, bank statements, federal tax returns – all that good stuff. Underwriters will then evaluate your income, credit score, and assets and debts.

Before closing, your lender will also order an appraisal. An appraisal is just a professional assessment of your home’s value. These evaluations can take two days to a full week to complete and cost $400 to $600.

If your application is approved and the appraisal goes well (meaning the home is worth at least as much as you’re trying to borrow), then you’re ready to close. Closing can take 30 to 60 days and typically costs 2% to 6% of your loan amount. If you don’t want to pay upfront, some lenders let you roll closing costs into your loan.

Refinance Your Mortgage With Dash Home Loans

At Dash Home Loans, we appreciate brutal honesty. So, we’ll tell you right here and now that other refinance mortgage lenders in North Carolina and South Carolina suck. Why do they suck? Because these profit-minded banks and credit unions don’t care about borrowers. They’ll put you through the wringer, forcing you to fill out unnecessary paperwork and decipher legalese alone.

We think you deserve better. That’s why we fired inefficient loan processors and streamlined our refinancing process. That’s also why we provide five-star customer service. Don’t believe us? Just read our reviews. Our Mortgage Coaches actually remember your name and will pick up the phone when you need them.

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Work with a trained Mortgage Coach like Crystal.

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Helping homeowners throughout the Carolinas

Apply for ARM Refinancing With Dash Today

Refinancing your home in North Carolina and South Carolina can be really overwhelming, but it doesn’t have to be! Contact Dash Home Loans today to learn about our stress-free refinancing process.

Ready to refinance? Awesome! Click “Apply now” below to get started.

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Frequently asked questions

NC & SC ARM Refinancing FAQs

Why are ARM interest rates lower?

The initial rate on an ARM is set below the market rate. Since the loan’s interest rate will adjust and very likely increase later on, this is a way of incentivizing borrowers. This low interest rate allows homeowners to enjoy lower monthly payments for a set period of time, sometimes as long as ten years.

Do I need an appraisal for an ARM refinance?

Yes, an appraisal is needed to assess the market value of your home. This figure is used by lenders to determine if you’re eligible for refinancing.

Is an ARM refinance a bad idea?

Not necessarily, an ARM refinance can be a great option for homeowners who want to secure a mortgage with a lower interest rate. However, this financing option isn’t for everyone since the interest rate will eventually adjust and likely increase. If the borrower can’t afford the higher monthly payments, they run the risk of defaulting.

Will I have to pay closing costs when I refinance?

Yes, closing costs are typically 2% to 6% of the final loan amount. If your refinance mortgage is $350,000, for instance, you can expect to pay between $7,000 and $21,000.