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Refinance Mortgage Loan Types

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  1. Fixed Rate Refinance

    If you chose an adjustable rate mortgage (ARM) as your first mortgage, you may find that refinancing to a fixed-rate mortgage is a good idea if interest rates are significantly lower now. When refinancing to a fixed rate mortgage, you can lock in the current, lower interest rates and pay less in interest and also have lower monthly payments. However, there are usually closing and transaction fees associated with refinancing debt and these costs must be weighed against the long-term benefits of doing the refinance. Again, you should consult with a mortgage professional to make sure that a refinance mortgage represents a sound financial decision.

    Another option is to change the terms of the fixed rate mortgage. Say your first mortgage is a 30-year fixed rate mortgage, refinancing to a 15-year fixed rate mortgage for example may increase your monthly payments but end up reducing the amount of interest you will ultimately pay in the long term. This results in your principal being paid off more quickly and increases your home equity.

    Refinancing to fixed-rate mortgages is most helpful for homeowners who intend on staying in their homes for several years (usually at least 10 years).

  2. Adjustable Rate Refinance

    ARMs are attractive to some homeowners because they traditionally have a lower initial interest rate than many fixed-rate mortgages. However, the interest rate for ARMs will fluctuate over time along with changes in market conditions. Refinancing to ARMs may be a good idea for homeowners who wish to do away with their high interest rate payments on the fixed-rate mortgage. Some borrowers who had an ARM as their first mortgage also choose to refinance from their first ARM to another ARM in order to get a lower rate.

    ARMs can be risky. Interest rates for ARMs vary depending on the lender and the interest payments will fluctuate. If a homeowner is planning on living in his or her current home for more than just a few years, a fixed rate mortgage may offer more financial security.

  3. Cash Out Refinance

    Cash-out refinance mortgages involve getting a new, larger mortgage to get extra cash to pay off debt whether it is a school loan, automobile payments, costs associated with home improvement, among other things. If you get a $225,000 cash-out refinance mortgage, the existing balance on your first mortgage can be paid off, and the homeowner has access to an additional $100,000 in cash.

    Typically, cash-out refinances are limited to a loan to value ratio of 80 percent. Lenders that offer a higher loan to value ratio will usually ask for higher up-front fees. Cash-out refinances can also be risky. You may incur extra tax liabilities when borrowing against your home. Borrowers may also increase their debt if they don't manage their spending habits effectively.

  4. No Closing Cost Refinance

    Let's Be "Totally Clear" About No Closing Cost Loans

    "No Closing Cost" mortgages are quite popular with consumers, yet the terminology is confusing since these mortgages don't eliminate costs but rather shift them from upfront costs to costs paid over time.

    In "no closing cost" mortgages, the closing costs are paid by the lender out of the fee they receive for delivering the loan to investors at a certain interest rate. The higher the interest rate on the loan delivered - the higher the fee paid to the lender. Since the lender pays the closing costs out of their loan revenues, it means that they will offer you an interest rate that will pay them sufficiently to produce their regular loan revenue plus an additional amount to cover the closing costs.

    In practice consumers choosing this option will pay a slightly higher interest rate over the life of the loan than they would if they paid the closing costs upfront themselves. However, in addition to reducing upfront out of pocket costs, "no closing costs" loans can make comparison between lenders easier since the interest rate is the only financial point of differential.

    At Total Mortgage we call our version of this popular loan approach the Total Fees Paid loan...clearly indicating that we are paying all lender-related fees. Upfront costs not included in the Total Fees Paid loan or other lender's "no closing costs" loans include charges for per diem interest, tax and insurance escrows, owner's title insurance and transfer taxes.

    Our mortgage professionals are prepared to assist you in examining the pros and cons of the Total Fees Paid loan:

    • speak with a mortgage professional now by calling 877-868-2503
    • Chat Live on-line with a mortgage professional

*If you would like to speak to a licensed loan officer to learn about mortgage refinancing process, call today at 877-868-2503.

Call a Total Mortgage expert now at 877-868-2503 to find out how we can customize a mortgage loan with some of the lowest current mortgage rates for you.

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