Regardless of the type of mortgage you have now, knowing what type of home loan refinancing to get is crucial, and will benefit you a lot. Many different loan refinance options exist, especially today, and knowing which one is the right match for your needs will greatly benefit you.

Generally, there are only a few different loan types for a home, an adjustable rate mortgage (ARM loan), fixed rate mortgages, interest only home loans, and sometimes a balloon payment loan. The best, most secure, and most stable loan type is the fixed rate loan. While slightly higher in interest rates than the initial rate on an ARM loan, the loan term stability, and non changing interest rates, are generally a much better option for a mortgage. ARM loans are considered more of a risk due to the interest rate changing constantly, and more often to the expense of the homeowner. Sometimes, and ARM loan can increase in cost by up to 50%, with the homeowner left holding the bag.

Interest only home loans offer initial low payments. However, these initial payments are paying the interest only, and not the principal, for a certain pre determined period. After this agreed to time, the loan will typically become amortized.

Balloon type home loans are not generally offered, and there many good reasons for that. While the payments may be small for a set amount of time, the final payments build up, resulting with one massive final payment. This payment is due as a lump sum, and cannot be financed. Also, with a balloon type home loan, a mortgage cannot be refinanced until this balloon payment is accounted for.

Always make sure that when you are refinancing that you get the proper loan for your needs and situation. Always consider the long term, and not just small short terms gains. Make sure to do the research on the different refinancing loan types prior to going out and applying. This will save you time, hassle, and possibly money. Refinancing can be great, if you know your options and find a mortgage lender or bank who can meet your needs.

-M Petrone

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