Mortgage Debt

Should I get a "fixed rate" or "variable rate" mortgage?

I think most people would prefer to have a fixed-rate mortgage because that means you know exactly what the interest rate is on the mortgage. Your payments are going to be the same for the entire term of the loan; nothing is going to be changing. There's really a lot of comfort in knowing that. With a variable rate loan, the interest rate is going to change periodically, it may change annually, it many change every of couple of years. It is true that there is very often a cap on how much it can change. If you're getting a loan like this you should know what that cap is. If there is a possibility that that rate is going to go up in the future, you want to make sure that you're going to be able to pay a higher payment if the worst happens. That's something that makes people a little bit nervous and that's why if you can get a fixed-rate loan at a relatively low interest rate, most people are going to want to go with that.

When should I consider refinancing?

You should consider refinancing your mortgage if you can qualify for a lower rate. Maybe you took out a fixed rate loan at a certain percentage and rates have fallen in the interim. That way you can get a better deal and you can lower your monthly payments, which is what you are aiming for when refinancing. Perhaps you want to do some remodeling on your house - you might consider taking out a refinancing loan. I would not do this frivolously, it really has to be something that's in your best interest, which usually means it's a lower interest rate or you're doing something to improve the value of your property.