Considering Refinancing Options

When considering refinancing your mortgage, you should make sure to consider all the options, including different types of mortgages. One type of mortgage you might want to consider is a 15-year fixed rate mortgage. This type of mortgage gives you a lower interest rate and far less total interest over the life of your loan, at the expense of having higher monthly payments. You will also build equity in your home faster with this type of loan.

Even if it is for a longer term, you might want to seriously consider a fixed rate mortgage when you are refinancing, especially if you currently have an adjustable rate mortgage with a high ceiling (or lack of ceiling) on interest rate increases. If you don't want to switch to a fixed rate mortgage, you might instead opt for an adjusted rate mortgage with limits on how much the interest rate can rise at each adjustment period, as well as over the entire period of the mortgage.

Another option to consider if you are planning on doing your refinancing with a particular company is obtaining a written promise guaranteeing the interest rate and number of points you will be required to pay at closing. Called a lock in, this promise ensures that the mortgage company cannot increase your rate even if rates have increased by the time you have settled on your new loan. You might also want to consider signing a similar agreement allowing the rate to go down but not increase before the loan is completed. Most companies place some time limit on lock ins, but they vary from company to company. Because many people may be financing at times when the market is favorable, processing may take some extra time, so make sure to contact your mortgage company to check on your loans process from time to time.