When you have decided that refinancing is the right choice for you, the next step is to find a mortgage loan that that fits your needs. As you look through your options, you’ll find that you have many of the same choices you had with your first mortgage.
Traditional Fixed Rate Mortgage
With a fixed rate mortgage, the interest rate is set for the full term of the loan. The monthly payment for principal and interest stays the same for the life of the loan. You may choose a fixed rate mortgage with a term to fit your budget. Terms generally run for 30, 20 and 15 years.
Adjustable Rate Mortgage (ARM)
An adjustable rate mortgage usually starts with a lower initial interest rate than fixed rate mortgages, but the interest rate on the ARM will grow over the life of the loan.
After an initial fixed payment period (usually 3, 5 or 7 years), the interest rate is subject to review and can move up or down based on the specific index and margin of your lender. Your monthly payment changes as the rate changes.
Which loan is better, Fixed or Adjustable?
Find the best interest rate
For many people, the main reason for refinancing is to get a better interest rate on their mortgage. Locating the right type of mortgage for you is important, but finding a mortgage with a low interest rate is equally as important.
You should look for a mortgage with an interest rate that is at least 0.5% lower than your current rate so you can recover the cost of refinancing. This is especially important if you plan to resell the house within a short amount of time after you refinance.
Shop around and compare interest rates among lenders until you find the best mortgage and interest rate for you.
Our professional mortgage financiers are among the best in the state, offering competitive financing for residential mortgages with Conventional, FHA insured and VA Guaranteed Loans. Stop by one of our convenient locations and let us help you find the loan that is best for you.
After deciding what kind of loan best fits you, your next step is to apply for the loan.