REFINANCING? WHY?

Reasons for Fixed Rate Mortgages

No one knows your situation and needs better than you do. But if you want to refinance your current home, you need to know the options that are available to you. There is the Adjustable Rate Mortgage (ARM) or the Fixed Rate Mortgage. The one you choose depends on your personal situation and the expectations you have for refinancing your mortgage.

A fixed rate mortgage is just that. This loan has a set, unchanging interest rate for the life of the loan. If the loan is for a period of 30 years then the interest rates will not fluctuate over that period of time unless you refinance again. Other fixed rate mortgages may run for only a set period of years 5 or 10 years. After that they become adjustable rate mortgages.

Those borrowers seeking stability in their loan will most likely benefit from a fixed interest rate mortgage. If you have a good credit rating you will be offered reasonable interest rates and terms. A fixed rate mortgage differs from an (ARM) in that the interest rate changes depending on the current financial trends. The monthly payments of these types of loans are subject to change. The payment rises or falls depending on the prevailing rate.

A fixed rate mortgage loan is among the safest type of loan you can get. From the inception of the loan until the end you know what your monthly payments will be; unless you decide to refinance again. The down side is the fixed rate mortgage will always carry a higher interest rate than a similar adjustable rate loan. If your credit history is not the best, this will cause the lender to charge a higher interest rate. Therefore, some borrowers choose the adjustable rate mortgage rather than the fixed rate mortgage.

If the economy is favorable and interest rates drop, borrowers with a fixed rate loan can find themselves paying a higher interest rate. That is the inherent risk of the fixed rate loan. The wise investor is the informed investor. Always research to find the best value for your money. Surf the internet, you can find answers to all your questions with just a click of the button. Talk to lenders, financial institutions and mortgage brokers. But make sure you have the knowledge to ask the intelligent questions. After all, the final decision is up to you.

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