When you obtain a refinance, mortgage refinance rate directly
affects your finances. Lenders offer different quotes depending on the
refinance interest rate. Different refinance rates, loan terms and high
or low monthly payments are interlinked. Different quotes based on these
factors, suit different individuals. A long-term refinance with a low
interest rate may suit one individual but not the other. Some other
individual may find a high rate and short term mortgage refinance more
beneficial. It depends on the situation and budget of every individual.
The most important reason for taking a refinance is to achieve better
financial stability and save money. A person should select an interest
rate that can save a substantial amount of money.

You should also
choose the best time to get the mortgage. Generally, acquiring refinance
is more beneficial when the refinance rate is at least 1% less than
existing interest rate. But you should not depend on the lower interest
rate alone. You should also consider refinance cost, term of loan etc.
to obtain the best mortgage refinance.

When you prefer the loan
term to interest rate, it affects your financial condition differently.
In a short-term mortgage, you save a substantial amount on refinance
interest payment even if the rate of interest is high. But your monthly
payment will become 10% to 15% higher than regular payment. If you
mortgage for a longer term, your monthly interest rate will be low. So,
you will pay lower monthly charges.

There are two types of mortgage rates available for the borrowers:

Fixed Rate Mortgage Refinance:

This
is beneficial to take when the interest rates fall. With a fixed rate
mortgage refinance, you pay a flat low interest. The yearly fluctuations
of interest rates do not affect your fixed rate mortgage.

Adjustable Rate Mortgage:

An
Adjustable Rate Mortgage (ARM) is more popular with the borrowers. It
offers lower refinance rates than fixed rate mortgage resulting in lower
monthly payments.

ARM is more beneficial when you move out of
your house soon. With ARM, there is always a risk of increased rates and
payments over the years. But you should keep ARM if the current
interest rates are 1% lower than your ARM rate.

When the interest
rates are very high, ARM may not be a suitable choice. With high
interest rates, you save money with locked in interest rates instead of
ARM. In converting your mortgage to ARM, you might end up spending more
money.

A particular type of mortgage refinance rate does not suit
every individual situation. One should also consider other factors like
loan term besides the interest rate before selecting a particular quote.
Your main aim should be getting the most suitable refinance and not
just the lowest interest rate.