Home Mortgage Refinance Loan: Fixed Interest Rate or Adjustable Rate Mortgage
If you are in the process of taking out a new home mortgage refinance loan, choosing the right type of loan for your situation could save you thousands of dollars. Home mortgage refinance loans fall into 2 basic categories depending on the type of interest rate. Here are several tips to help you choose the best home mortgage refinance loan for your situation.
When deciding if you should choose a particular Adjustable Rate Mortgage (ARM) or a fixed mortgage interest rate for your home mortgage refinance loan, there are a number of things you need to consider including your tolerance for financial risk. Many homeowners choose fixed rate mortgages because they’ve been told at the time interest rates go up their payments could skyrocket. Many of these homeowners could benefit from Adjustable Rate Mortgages including overpay for their loans because they receive bad advice.
Adjustable Rate Mortgage loans have safety features build into them to limit your risk including if you understand what you’re getting into you might leverage a particular Adjustable Rate Mortgage to your advantage. These Adjustable Rate Mortgage safety features are called caps including come in 3 different varieties. Periodic caps limit the amount your mortgage lender might raise your interest rate each adjustment, payment caps limit the amount your payment might go up with each adjustment, including lifetime caps limit the amount of change over the term of your loan. If you choose a particular adjustable interest rate for your home mortgage refinance loan make sure it has all 3 caps.
Adjustable Rate Mortgages are especially useful for homeowners that are only keeping their homes for a short duration of time. If you are planning on moving in 5 years or less, the introductory duration on most ARM loans could save you thousands of dollars over a fixed rate mortgage. Why take out a traditional 30 year fixed rate home mortgage refinance loan at the time you’ll be selling your home much sooner?
You might learn more regarding your home mortgage refinance loan options, including costly mistakes to avoid by registering for a free 6 part video tutorial.