Refinance Fixed or Adjustable Rate Mortgage Loans?

Mortgage banker offers refinance advice for both fixed and adjustable interest rate mortgage loans. The economy, the Federal Reserve and the bond market are three important factors that typically drive the interest rates up a down. The secondary market on Wall Street shifts the types of mortgage products based on servicing performance and consumer demand. A few years ago hybrid ARM's with low teaser rates and negative amortization were hot loan products because home values were rising. Currently fixed rate mortgages are popular because the default rate on the ARM's was high the real estate market has declined across the country.

Mortgage Rate Benefits with Fixed vs. ARM . Fixed Mortgage loans Guarantee Interest Rates . ARM Refinancing Offers low Intro Rate . Interest Only ARM’s Provides Flexibility . Refinance and Pay off Variable Credit Cards . Lower Monthly Payments with ARM’s . Refinance & Combine all of your Loans into one reduced payment mortgage. . Fixed Rate Offers Hedge Against Inflation . Bad Credit Refinancing available with FHA Learn more about FHA Home Loans

Most homeowners use a line of credit or short term ARM to finance a home remodel because they only pay interest when they access funds.

Should I Get a Refinance Loan With a Fixed or Adjustable Rate?
By Carolyn Staggs

Refinance Tip: You can borrow against the equity in your home when you need to.

Your home may be your castle, but it can also be a source of ready cash. If you have owned your place for a few years, done some improvements, or maybe just live in a high-demand area, you can have considerable equity.

The equity from your house can be converted into money through one of several different financing instruments. This step may be cumbersome but worth while task is to find out which type of loan is best for your situation.

Making the decision to pull some of the equity from your home is only one of the numerous choices you will face before you sign your name to a mortgage note.

Refinance - If your original mortgage rate is higher than the current rate of interest, if the length of your mortgage or the size of payments are wrong for you, or if some terms of your mortgage are making your life difficult, this may be your best choice.

Second Mortgage - If you just want to keep the sweet deal you have on your first, or today's terms are less than best, this can give you the tool to utilize that money accruing in your home.

Home Equity Loan - Flexibility is the keyword of this choice because you can take cash out with a revolving line or fixed installment loan. You can take a little now and take even more as you need it to finance a trip, home improvement projects or college tuition.

You can use a fixed rate over a set period of years, or can base your interest rate on the market. If your personality demands riding the market, or if it demands the known quality of a set rate for a set time, you don't need to analyze anything. Just gamble on your ability to pull off whichever type looks best to you. If you are like most of us, you will want to consider some of the variables and identify which fits your financial profile best. This requires some research.

Fixed Rate

The interest rate on home loans has been the lowest in decades. The Prime Rate, a component of your mortgage interest rate calculation, was 20.5% in 1981. It took 4 years for that rate to fall below 10%. It hovered in the 7 - 7.5% range for a year in '86-'87, and bounced back up to 10% in '88. In 1991 a decline dropped the prime 3.5 percentage points in one year. It remained in the 6% range for 2 years and then played with the 8 - 9% range until 2001 when it got back to 6%. By the end of 2001 the rate had hit 4.75% and stayed in that neighborhood for almost 3 years, dropping as low as 4%. Since July 2003, the rate has slowly climbed to the current 8%.

So what does all this economic history have to do with your getting some money? It's a track record to look at to help predict how that rate is going to change in the next few weeks, months or years. Because that rate should be of prime concern to you in selecting which loan structure is best.

Adjustable Rate

This structure has gained popularity because of the ever-increasing home prices in demanding markets. It's also a great tool for the first time buyer. It allows the purchaser to be creative in putting together a package of several options, enabling them to get into a home with minimum down, lower initial payments and provides time to decide if it works best. That means that you can purchase that house now before the price goes up, yet have a built-in option to change it in a few years. Since so many people move within 5 years - the common first step in an adjustable rate mortgage - it allows lower living expenses for the soon-to-move homeowner. This is especially helpful in high cost neighborhoods.

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