Mortgage Refinancing Tips - Which Type of Loan Should You Choose
There are two basic types of mortgages to choose from when refinancing your mortgage. The type of mortgage you choose will have a fixed interest rate that does not change for the duration of your loan or an adjustable interest rate that changes at regular intervals. There isn't one type of mortgage that is better than the other; both types have advantages and disadvantages based on the circumstances they are used.
Mortgage refinancing with a fixed interest rate loan has the advantage of a predictable monthly payment amount that does not change for the entire duration of your loan. If you need a mortgage payment you can plan your budget around this is the type of mortgage for you. Because the interest rate does not change over time there is very little risk associated with fixed rate mortgage loans. If you have little tolerance for risk with your finances this is the type of mortgage loan for you.
Adjustable Rate Mortgages have an interest rate that changes over time. The mortgage lender will adjust the interest rate to the index your loan is tied to at regular time intervals. Common intervals for adjustment range from every 12 to 24 months; when this happens the lender will change your mortgage rate to the index rate plus margin. Adjustable Rate Mortgages typically have lower interest rates than fixed rate loans, at least initially. These loans typically come with a low introductory mortgage interest rate or "teaser rate." At the end of the introductory period the lender will adjust to the contract rate and your payment will go up. Homeowners who use Adjustable Rate Mortgages properly can save themselves thousands of dollars in finance charges.
The type of loan you should choose when refinancing your mortgage depends on your objectives for the loan and your tolerance for risk. You can learn more about finding the perfect mortgage for your situation with a free mortgage refinancing tutorial.
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To get your FREE six-part Mortgage Refinancing Tutorial, visit RefiAdvisor.com using the link below.
Louie Latour specializes in showing homeowners how to avoid costly mortgage mistakes and predatory lenders. To get your hands on this free video tutorial: "Mortgage Refinancing - What You Need to Know," which teaches strategies for finding the best mortgage and saving thousands of dollars in the process, visit Refiadvisor.com.
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