Thinking about refinancing?

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There are different types of loans that you must be aware of when financing a mortgage. The best decision for you, will once again, depend on the prevailing interest rate and your own set of personal preferences. In either case you should attempt to find the best financial alternative. Also note, credit scoring will determine how low of an interest rate you can get. 

Fixed- Rate Mortgages When opting for a fixed rate mortgage you are agreeing to pay a fixed amount of interest for a fixed amount of years. For example, if the current interest rate was 7.5% and your loan was for 30 years, you would be locked into a 7.5% interest for the 30-year timeframe of your loan. This would be very advantageous if the interest rate skyrocketed to 15% years later, but would be to your disadvantage if interest rates fell to 6%. Besides financing for 30 years you could opt to finance for 15 years which would increase your monthly payment; however, dramatically decrease the amount of interest paid on the life of the mortgage. Note, interest payments on a mortgage are generally tax-deductible. You can also get out of higher interest rates by refinancing your home; however, you will incur additional finance charges.

Adjustable Rate Mortgages or (ARMs)  If you don't like the fact of being locked into an interest rate for a long amount of time you may find ARMs attractive. An ARM's interest rate fluctuates up and down with the movement of interest rates. Your starting interest rate is typically several percentages lower than fixed rate mortgages, and your hope is that the interest rate will stay below the fixed rate alternative at the time. While the interest rate fluctuates up or down it is important to know that your payment will also fluctuate in correspondence with its movement. ARMs typically are offered in 5,3, or 1 year time frames. Note, ARMs may be converted into fixed loans with associated finance charges.

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