The Best Options For Refinancing When Rates Are High

Tena Moore

If you are purchasing or refinancing when rates are high, or are aware of rising rates, you may want to know more about fixed rate loans, adjustable loans and hybrid loans, to avoid paying more.

Fixed interest rates are usually slightly higher than variable rates. However, if you fix your loan before a variable rate rise you can make a significant saving on fluctuating interest rates .

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Most adjustable-rate mortgages limit how high the interest rate can go during the life of the loan, but are a bit more risky in terms of having a stable, fixed monthly payment . If you’re nervous about this, a hybrid mortgage, also called a fixed-period ARM, might be right for you.

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A hybrid mortgage is one that has a fixed interest rate for a period of time , usually for 3, 5, 7 or 10 years. After the fixed interest rate period, the interest fluctuates for the remaining term of the loan. With a 10-year fixed ARM, it’s likely that the homeowner will never experience rate fluctuations because statistics show that most homeowners either sell their home and pay off the mortgage or refinance within 5 to 7 years.

Many lenders allow you to split your loan. Splitting your loan means that a portion of the loan is fixed, while the rest remains subject to the variable rate.

If you are buying when rates are high or getting ready to rise, talk to your lender about your options and find the most suitable one for you.

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