Your Guide to Credit and Personal Finance

Rising rates may make ARMs riskier
Refinancing could protect you from higher monthly mortgage payments.

If you have an adjustable-rate mortgage (ARM) and are worried about the prospect of higher interest rates later this year, you might want to consider refinancing to take advantage of today’s still-attractive interest rates on fixed-rate mortgages.

If your ARM has already been reset or is scheduled to reset soon and your new monthly payment won’t be affordable, the decision to refinance your ARM may be simple. Yet the decision still should be made carefully since your mortgage is most likely your largest monthly expense.

In addition to the outlook for interest rates, other factors you should consider include:

• Your tolerance for risk.
• The interest rate caps on your current ARM.
• How long you intend to own your home.

If you refinanced your ARM today with a fixed-rate mortgage, you’d be protected from the possibility of higher interest rates and monthly payments in the future. That’s because a fixed rate means exactly that: The rate never changes over the entire term of the loan, be it 15, 30 or even 40 years. A 30-year fixed-rate mortgage originated today at 6.5 percent would still have that same 6.5 percent interest rate in the year 2038, when it would be paid in full.

Remember that refinancing usually extends the term of the loan, which results in a longer time–and more payments–until the loan is paid off.

Interest rates are already higher today than they were a year ago on 30-year and 15-year fixed-rate mortgages and most ARMs. The good news for borrowers, however, is that loan fees and points are lower, on average, than they were a year ago on some loan products.

Higher interest rates could be on the horizon if inflation, which refers to higher prices, forces the Federal Reserve to hike bank interest rates. The Fed doesn’t directly set interest rates on mortgages, auto loans or credit-cards, but its actions indirectly affect the general direction of rates that consumers pay.

Before you decide to refinance your loan, review your current ARM with your loan officer. Find out how much your interest rate and payment could increase and when each adjustment will occur. How comfortable–or uncomfortable–would you be if the worst-case scenario for your ARM came true? If that scenario makes you queasy, refinancing could be a smart way to protect yourself from that risk.

© 1998 - 2008 LendingTree, LLC. All rights reserved. No part of this article may be used or reproduced without prior written permission of LendingTree, LLC.

Rate locks when rates are rising
By Marcie Geffner - LendingTree.com

If you’re ready to apply for a home loan, but are concerned that interest rates might go up before your loan closes, a rate lock might be just what you need.

A rate lock puts a hold on your interest rate for a set period of time, though you’ll still have to qualify for the loan to receive that rate.

If you expect your loan to close quickly and you’re willing to take a chance that interest rates might go up, a lock might not be important to you. But if there could be a delay before your loan closes or you couldn’t afford the loan if the rate went up, a lock might be a smart precaution. Ask your loan officer to help you weigh the pros and cons and decided when to lock your rate, if at all.

Some lenders will lock your rate when you submit your application. Others will float the rate until your loan is approved or even longer, unless you purchase a lock.

Don’t confuse a rate lock with a fixed-rate loan. A lock holds the rate while your loan is being processed. It doesn’t mean your rate can’t change after your loan is funded.

If you want to consider a lock, be sure to ask these questions:

● Does the lock apply to the interest rate and points?
A “point” is a fee that’s equal to 1 percent of the loan amount. Some borrowers “pay points” to reduce the interest rate on their loan. A lock should cover both the rate and points.

● When will the lock expire?
A typical rate lock is good for 30 days, but a longer or shorter period might be appropriate, depending on how soon you expect your loan to close. Most lenders charge a higher fee to lock your rate for a longer time. If you don’t want to take any chance that your rate might increase, err on the side of caution and get a longer lock.

● Can the rate float down?
One disadvantage of a rate lock is that if you lock your rate and then the interest rate goes down, the lender might not give you that lower rate. Some lenders allow a one-time float downward after the rate is locked.

If a rate lock is important to you, be sure to work with a reputable lender who will honor that commitment and process your loan in a timely manner. Insist that the terms of the lock be put in writing, and keep in close contact with your loan officer to make sure your loan will close before your lock expires.

© 1998 - 2008 LendingTree, LLC. All rights reserved. No part of this article may be used or reproduced without prior written permission of LendingTree, LLC.

11.7.2008 - Following an announcement on 8th July 2008 from the Federal Antimonopoly Service (FAS Russia) when it confirmed that it had initiated a case against Home Credit & Finance Bank (”HCFB”) for allegedly breaching Article 14 of the Federal Law “On Protection of Competition”, the Directors of HCFB today issued the following statement: