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Adjustable-Rate Mortgage Refinancing in Virginia

Do you want to refinance in Virginia? If so, partner with Dash Home Loans. Since our Mortgage Coaches work with all kinds of homeowners – from retirees with less-than-perfect credit to young parents with heaps of student debt – they can find a refinancing option that suits your needs. Depending on your circumstances, that may be an adjustable-rate mortgage – “ARM” for short.

With an ARM, you begin repaying your mortgage at a competitively low-interest rate. Then, after a set period of time, the interest rate adjusts. This flexibility is perfect for homeowners who anticipate a salary increase in the foreseeable future. Think this refinancing tool is right for you? Keep reading to learn more.

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What Is an Adjustable-Rate Mortgage?

As a homeowner, you’re probably well-acquainted with interest. But just to make sure everyone is on the same page, interest is the cost of borrowing money. It’s expressed as an annual percentage rate (or APR) and may fluctuate depending on factors like your creditworthiness, loan term, and home price.

With a fixed-rate mortgage, the interest remains static for the life of the loan. But with an ARM, the interest rate fluctuates. At first, your lender will offer a “teaser” rate that’s set well below the market rate. You’ll benefit from this rate for a set period of time – usually five to seven years. 

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

Understanding Virginia Adjustable-Rate Mortgages

Now, we’re going to dive deep into the world of ARMs. If you get lost, feel free to give us a holler. As a refinancing lender in Virginia, we can connect you with an expert Mortgage Coach who will gladly answer any questions you have.

Typically, homeowners get the gist once they understand these basic concepts:

  • Index: An index is a benchmark interest rate based on general economic conditions. This interest rate varies. 
  • Margin: The ARM margin is the number of percentage points added to the index. The margin is set in your loan agreement and will never change.   
  • Initial and Periodic Caps: The initial adjustment cap dictates how much your interest rate can rise or fall the first time it adjusts. This safeguards both the lender and borrower, preventing the APR from soaring or plummeting. Period caps protect homeowners by regulating how much the interest rate can change during an adjustment interval.   
  • Lifetime Cap: The lifetime cap is the maximum interest rate a borrower can expect to ever pay.

An ARM is expressed using two numbers. The first number is the length of your fixed rate period. The second number is how often the rate will adjust after the initial teaser period. If you opted for a 3/1 ARM, for example, you’d have a fixed rate for three years followed by a floating rate that adjusts annually.

Most ARMs also feature an adjustment cap. This limits how much the interest rate can change at each adjustment period. For instance, a 7/1 ARM with a 5/2/5 cap structure means your rate won’t change for the first seven years. But during the eighth year, your rate can increase by a maximum of 5% (the first “5”). In the years to follow, your rate can increase by a maximum of 2%, as indicated by the second number. However, your APR can never increase by more than 5% (the second “5”).

Mortgage Refinancing in Virginia

Are you starting to feel a little less confused? If so, let’s launch into refinancing. Though refinancing sounds complicated, it’s basically just the process of exchanging your old mortgage for a new one. This new and improved loan may provide:

  • A more competitive interest rate
  • Improved loan terms
  • A lower monthly payment
  • The ability to cash out your home’s equity 

Many homeowners refinance from an ARM to a fixed-rate loan because they want a more stable APR. However, refinancing from a fixed-rate mortgage to an ARM is also possible. This option is perfect for borrowers who anticipate a salary bump in the near future. It’s also beneficial for homeowners who want to sell in the next five years. 

Why You Should or Shouldn’t Refinance to an ARM

Sure, refinancing to an ARM can lower your interest rate and monthly mortgage payment – at least in the beginning. But is this refinancing tool right for everyone?

We’ll start on a high note. You should consider refinancing to an ARM if:

  • You need a lower interest rate ASAP
  • You want to sell in the next five years
  • You anticipate a raise
  • You think interest rates are on the decline

However, avoid ARMs at all costs if:

  • Your income ebbs and flows
  • You want to pay your mortgage off early
  • You anticipate a spike in interest rates

Still not sure if you should refinance to an ARM? Contact us online or call 757-280-1994.

ARM Refinancing Requirements in Virginia

Does an ARM refinance sound like a match made in heaven? Awesome! Now, before you get too attached, you need to determine if you’re eligible. Though refinancing requirements vary from lender to lender, homeowners hoping to refinance to an ARM in Virginia must generally have:

  • A credit score of 620 or higher. Borrowers with less-than-stellar credit may still qualify. Though, that depends on the lender. 
  • At least 20% home equity. This percentage is calculated by dividing your current mortgage balance by your home’s value. You’ll need an appraisal to determine your home’s current value. 
  • 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. Depending on your lender, there may be no waiting period. 

As previously noted, your lender may have more specific requirements. Fortunately, your Mortgage Coach at Dash Home Loans can help you determine your eligibility.

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

Refinancing to an ARM is as easy as pie. To begin, you’ll need to pick your lender. You can either go steady with your original lender or shop around. Just remember that certain mortgage lenders offer more competitive rates, so you shouldn’t settle for a steep APR.

Once you’ve locked in your lender, you’ll need to gather the standard documentation: W2s, pay stubs, bank statements, federal tax returns – the list goes on. Underwriters will then evaluate your creditworthiness and request an appraisal, which is a professional assessment of your home’s value.

If your application is approved, the next step is to close. Closing can take 30 to 60 days and typically costs 2% to 6% of the loan amount. Though some lenders let you roll closing costs into your loan, remember that this will increase your monthly mortgage payment.

Refinancing Your Mortgage in Virginia With Dash Home Loans

Let’s face it: Most refinance mortgage lenders in Virginia are terrible. The loan officers are inefficient at best and rude at worst. They drag their feet, waiting weeks to return your phone calls and answer your emails. When they do, they speak in confusing, industry-specific language that’s hard to understand.

At Dash Home Loans, we believe Virginia homeowners deserve better. That’s why we streamlined the refinancing process, eliminating unnecessary steps and paperwork. We also offer five-star customer service and will work day and night to ensure every client is satisfied.  

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Work with a trained Mortgage Coach like Crystal.

Helping Homeowners Throughout Virginia

Apply for Virginia ARM Refinancing With Dash Today

Refinancing your home in Virginia can be super stressful – but it doesn’t have to be. Contact our Virginia Mortgage Coaches today to learn about our easy peasy refinancing process.

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

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Frequently Asked Questions

Why are ARM interest rates lower?

ARM interest rates are lower, but only initially. This teaser rate is a way of incentivizing borrowers since ARM rates adjust – and typically increase – later on.

Do I need an appraisal for an ARM refinance?

Yes, an appraisal is needed to determine the value of your home and your subsequent lending limit. 

Is an ARM refinance a bad idea?

Though an ARM refinance isn’t for everyone, it can be a great option for certain homeowners. If you hope to sell your home in the near future, expect a salary increase, or want to save money and invest elsewhere, an ARM could be a great choice.  

Will I have to pay closing costs when I refinance?

Yes, closing costs are typically 2% to 6% of your loan principal. If your mortgage is $400,000, for example, you can expect to pay between $8,000 and $24,000.