All through this website we have discussed each mortgage refinance option on its own or as oppose to a different alternative. In this article, I will briefly examine the different and most common mortgage types we can take when performing mortgage refinance.

Fixed Rate Mortgage

As we saw, a fixed rate mortgage freezes the interest rate according to the current market conditions, for the entire loan’s period. This is a suitable instrument for loaners that do not wish any changes or surprises with the monthly payments for the entire loan.
Some lenders don’t to make new payments or to redraw on additional funds, while selecting a fixed rate mortgage.
This mortgage will not change but will definitely give the loaner peace of mind throughout the loan.

Adjustable Rate Mortgage:

As suggested by its name – the ARM is a loan in which the interest rate changes periodically based on a certain the economic index it is linked to. This is a good mortgage refinance solution when the loaner think he is facing a declining interest rate period in the mortgages market. The initial rate in the Adjustable Rate Mortgage is normally lower than the fixed mortgages rate, and the interest itself can change throughout the loan’s life to a certain extent yearly.
Read more in the following article Mortgage Refinancing to an ARM.

Home Equity Loan:

These is a fixed rate mortgage-like that allows the loaner to tap into his equity and basically get cash for different purposes while increasing his debt-to-property ratio.
The annual percentage rate in the Home equity loans are usually fixed and very appealing.

Home Line of Credit / HALOC

This is similar to the home equity loans, but in a form of a  line of credit that allows the loaner to cash on his mortgage balance up to the original borrowed sum, just like a credit card.

With both of these loans – care is advisable, since they reduce the equity we have built up throughout the years. It is best to use them for home-improvement purposes and not for speculative ventures.
Read more in Leveraging Refinance: Cashing Out & Home Equity Loans

In a nutshell we also have the ability to refinance to a Balloon Mortgage, in which we take a fixed rate mortgage for a short period of time – normally 7 to 10 – while paying only interest. At the end of the balloon, we still have a rather large principal to repay in full. Caution while carefully planning is advisable when dealing with a balloon mortgage.

Now that your know your way around the different instruments, you can check if mortgage refinance is a good solution for your mortgage. Good luck.