Before looking at the types of refinancing plans, you need to evaluate whether refinancing right now is the best option for you. If you plan to stay in your home for at least five more years, refinancing may make sense. But if you plan to move in less than five years, you may not have time to recoup the costs of refinancing.
Whatever your situation, call us any time to help you arrive at a decision that will be best for your circumstances.

Here are descriptions of the four major types of refinancing plans.

1. From an Adjustable Rate to a Fixed-Rate Mortgage

If you have an adjustable rate mortgage (ARM), you already know that your mortgage interest rate can go up and down. It may have been down when you took out the mortgage, and it may have gone up more recently. In a volatile economic climate, a fixed-rate mortgage may make more sense.
A 30-year fixed-rate mortgage will usually have a higher interest rate than the initial interest rate on an adjustable rate mortgage. So switching to a fixed rate mortgage only makes sense if you plan to stay in your home long-term, usually five years or more.

2. From a Fixed-Rate Mortgage to an Adjustable Rate Mortgage

With an adjustable rate mortgage, you will start with a lower rate and a lower monthly payment. So, if you only plan to stay in your home for a few years, this type of plan could save you money and make it worthwhile to refinance.

3. To a Mortgage Which Reduces Monthly Payments

Regardless of long-term considerations, your primary objective may be to lower your monthly payments. If that’s the case, here are several ways to do so:

Refinance to either a fixed rate or adjustable rate mortgage which has a lower interest rate. This usually translates into a lower monthly payment.
Change the length of your mortgage. If you extend a 15-year fixed-rate mortgage to 30 years, the amount you owe will be spread out over a longer time, and so your monthly payments will drop. Don’t forget, that if you shorten the term of your mortgage, for example from 30 years to 20, your payments will increase but you will save a lot of money over the long term that would have been paid in interest.
Obtain an interest-only loan. Monthly payments will be lower because you’re only paying interest, not principal. You can always contribute to principle if you have extra funds available. Keep in mind that the balance of your loan will not go down over time with this type of plan.

4. Get Cash Out Of Your Home

If you have equity in your home, it may be possible to refinance and take out some of that money. This is called cash-out refinancing. Whatever your reasons for needing cash, it could be advantageous for you to have a use right now of the money invested in your home. This type of plan can allow you to do that.