If your 'ARM' is out of control, consider tying it down with a refinanced 'FRM.'

Fixed interest rate mortgages (FRMs) on conforming 30-year mortgages averaged 6.14 percent on Nov. 30, according to Freddie Mac.

That's the lowest they've been since January this year when they dipped to 6.10 percent.

If you been holding an adjustable rate mortgage (ARM) -- including your equity loan -- for even a year, you could be paying at least 8.5 percent, up from 7 percent a year ago, based on the Wall Street Journal Prime Rate to which many ARMs and equity loans are attached.

Your mortgage costs could have risen even more if your mortgage rate is attached to other indexes or you have an ARM with short adjustment periods.

Higher payments are not the only reason to cash in an ARM for a FRM, but it is typically a prime reason.

Stephen Katz, of the Katz Mortgage Team in Atlanta says, "Many of our clients took advantage of the super low ARM rates of three and four years ago and have saved a tremendous amount of money. But now we urge these homeowners to take a look once again at refinancing to a more stable fixed rate. If a family plans to stay in their current home for more than two years, or if they plan to keep it as a rental, now is the perfect time to switch horses and go back to a fixed rate."

Do your math.

You may not need to stay in the home two years. And even if your payments remain the same, a refinanced mortgage could still be a good deal.

The point is, it's an individual decision based on your household's financial numbers. Here are some numbers to consider.

If your first mortgage has a fixed rate, it's easy to compare it with current rates and be relatively certain if you should deal or not. If current rates are lower than your mortgage's fixed rate, you could consider refinancing, but not without considering the cost of refinancing.

If you aren't going to remain in the home long enough for the monthly savings to add up to an amount that covers the cost of refinancing, what's the point?

Staving off foreclosure could be one.

If you desperately need lower payments now, a refinance could be for you, even if you know you'll move soon. Whenever possible, however, you want to stay put at least long enough for the savings to pay off the cost of refinancing.

If you have an ARM and you've watched your monthly payment rise to budget breaking levels it may be time to shop around.

It's easy enough to calculate what a new loan will do to your monthly payments, but a little more difficult to both determine how long you need to remain in your home to make the refinance pay off and to factor in other considerations.

The numbers vary if you:

• Sign for a cash-out refinance to, say, pay off bills, pay for home improvements, college education, a business venture or some other expense.

• Refinance to get rid of that private mortgage insurance. Your mortgage payment could remain the same, but the private mortgage insurance premium goes away, saving you that much money a month

• Consolidate your first and second mortgage, to get rid of the typically higher rate on your second mortgage, often a line of credit type ARM with adjusting interest rates and payments.

• Rewrite only the line of credit to avoid losing the low interest rate you already have on your first mortgage. Depending on your second loan terms and your lender's loan programs, you may be able to convert only your second mortgage with a no-fee, no-cost fixed rate loan at an interest rate well below the adjusted one you now carry.

"Today there are at least a dozen ways to package up a fixed rate mortgage loan. Spend some time discussing your entire financial situation with a trusted mortgage consultant (or other financial advisor)," said Katz.

The key when refinancing is to find the best financial fit for you and your family.

Published: December 6, 2006

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.