Mortgage Refinancing - Choosing the Best Mortgage Loan Option

If you are in the process of mortgage refinancing, you might feel overwhelmed by all of the mortgage loan options available to you. There are different types of mortgage refinancing loans for every situation; however, choosing the wrong type of loan when mortgage refinancing could be a costly mistake. Here are several tips to help you choose the right mortgage for your individual situation.

Which Type of Lender Should You Choose When Mortgage Refinancing?

There are many options available when choosing a lender for mortgage refinancing. Banks, mortgage brokers, online portals, and local mortgage companies all offer mortgage refinancing loans. Choosing the wrong type of mortgage lender is a costly mortgage mistake you need to avoid. Banks and broker-banks should be avoided when mortgage refinancing. Banks are exempt from disclosure laws in the United States that protect borrowers from predatory lending practices. If you take out a mortgage from your bank they could overcharge for the loan and you'd never know. Mortgage companies and brokers are retail outlets for mortgage loans and can help you find competitive offers for your new loan. There are still risks when dealing with a broker or your local mortgage company. These companies regularly mark up the interest rates they receive from wholesale lenders to receive an additional bonus from that lender. If you learn how to recognize retail markup on your interest rate, you can avoid paying it.

What Type of Loan Should You Choose When Mortgage Refinancing?

There are a number of loan options when mortgage refinancing. You have the choice of taking out a loan with a fixed interest rate, an adjustable interest rate, or a hybrid loan with both types of interest rates. When interest rates are rising, mortgage refinancing with a fixed interest rate loan has the advantage of a predictable payment amount you can plan your budget around. Fixed interest rate mortgage refinancing typically comes with higher rates than a comparable loan with an adjustable interest rate, at least initially. Adjustable Rate Mortgages save money in the beginning because these mortgages come with an introductory interest rate that is significantly lower than the actual rate. Once the introductory period expires the lender will adjust the monthly payment amount to include the actual interest rate. When this adjustment occurs the payment amount will go up significantly.

Cash-out Mortgage Refinancing

When refinancing your mortgage you have the option of taking cash back from the equity you own in your home. Cash-out mortgage refinancing has a number of advantages over home equity loan options. The main advantage over other home equity loan types is that you will only have one monthly payment to make. Because you will only be carrying one mortgage on your home you will also qualify for a lower interest rate. You can learn more about your mortgage refinancing options, including common mistakes to avoid by registering for a free mortgage refinancing guidebook.

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