Are you refinancing to lower your rate and monthly payments? Your best option might be a low fixed-rate loan. Maybe you have a fixed-rate mortgage now with a higher rate an adjustable rate mortgage where the interest rate varies. Even if it's low now, unlike your ARM, when you qualify for a fixed-rate mortgage you lock that low rate. This is especially a good idea if you don't think you'll be moving within the next five years or so. On the other hand, if you do see yourself moving within the next few years, an ARM with a low initial rate might be the best way to lower your monthly payment.
Are you refinancing primarily to cash out some home equity? Maybe you want to pay for home improvements, pay your child's college tuition bill or take your dream vacation. Then you'll want to qualify for a loan for more than the balance remaining on your current mortgage. If you've had your current mortgage for a number of years and/or have a mortgage whose interest rate is higher, you may be able to do this without increasing your monthly payment.
Do you want to build up home equity more quickly, and pay off your mortgage sooner? Consider refinancing with a shorter-term loan. Your payments will be higher than with a longer-term loan, but in exchange, you will pay substantially less interest and will build up equity more quickly. This is a great option for people whose goal is to build up equity and pay off their home sooner.
When you refinance, you might be able to lower your interest rate and monthly payment. You might also be able to "cash out" some of the built-up equity in your home. With lower rates and balances, you might also be able to build up home equity faster with a shorter-term new mortgage.
All these benefits do cost something, though. When you refinance, you're paying for most of the same things you paid for when you obtained your original mortgage. These might include settlement costs and other fees, an appraisal, lender's title insurance, underwriting fees, and so on. For most people, the amount of up-front costs to refinance are countered by monthly savings. Mortgage Source PA will work with you to determine what program is best.