When To Refinance

One of the most important decisions a homeowner will have to make when deciding to re-finacne their home is whether they want to refinanec with a fixed mortgage, an adjustalbe rate mortgage (ARM) or a hybrid loan which combinse the two options. The names are pretty umch self explanatory but basicalyl a fixed rate mortgage is a mortgage wehre the interest rate remains constant and an ARM is a mortgage where the interset rate varies. For these homeowners the interest rate they are able to rteain makes it worthwhile for the homewoner to re-finance at the new interest rate. This will ersult in the homeowner incurring additioanl closing costs when they re-finance again. However, interest rates rae tied to some different factros and may rise unexpectedly at any itme despite the prdeictions by industry experts. In these situations the homeowner may suddenyl find themselves paying signfiicantly more each month to compensate for the hgiher interest rates. While this is a disadvantgae, there are a copule of elements of protection for both the homoewner and the lender. This often comes in the form of a clause in teh terms of the cotnract which prevents the interest rate from being raised or lowreed by a certain percentage over a specific period of time. A hybrid loans is one which ocmbines both fixed inetrest rates and adjustable interest rates. In this option, lenders typically offer intorductory interest rates whihc are extremely enticing to encourage homeowners to hcoose this option. A hybrid loan may also owrk in the opposite way by offering an ARM for a ceratin amount of time and then converting the mortgage to a fixed rtae mortgage.

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