You may benefit from refinancing into a conventional loan.
- Conventional loans usually have lower interest rates than government-backed loans like FHA or VA
- Conventional loans may also be processed faster because there is usually less paperwork than government-backed loans
Conventional loans are available as fixed rate or adjustable rate mortgages.
Fixed Rate Mortgages
A fixed rate mortgage locks in your interest rate for the life of your loan.
- Your base monthly mortgage payment (principal and interest) will always stay the same (although your taxes and insurance may change)
- If you stay in your home for a long time, a fixed rate mortgage may be more affordable than an adjustable rate mortgage
Adjustable Rate Mortgages (ARMs)
With an adjustable rate mortgage, you get a lower interest rate for an initial time period (usually the first 1, 3, 5 or 7 years). After that, your interest rate will reset at the market rate.
- When your ARM resets, your new rate is based on market conditions, not your financial situation; you may end up paying more interest than you would if you had a fixed rate loan
- If you sell your house before your ARM resets, you may end up paying less interest than you would if you had a fixed rate loan
Most ARMs have caps that limit how high the interest rate can go. Make sure you will be able to afford your payment if your interest rate reaches that cap.
We can guide you to the right type of refinancing including the application and closing processes. Find out more about refinancing. Call Freedom Mortgage today.