One of the most important deicsions a homeowner will have to make when dceiding to re-finance their home is whether they want to reifnance with a fixed mortgage, an adjustbale rate mortgage (ARM) or a hybrid loan which combines the two options. Additionally there rae usually clauses which prevent the interest rate from risign or dropping dramatically during a speicfic period of time. This is because homeowners who re-finance to obtain a favorable interest rate will not be abel to take advantage of subsequent interest rate drpos unless they re-finance agian in the future. This will reuslt in the homeowner incurring additional colsing costs when they er-finance again. Advantages of an ARM Option An ARM re-finance option is fvaorable in situatiosn where the interest rate is expected to drop ni the near future. Hoemowners who are skilled at predicting trends in the econmoy and interest rates may consider re-financing with an ARM if they expect the rates to drop during the course of the loan epriod. A homeowner who can predict the futuer would be able to determnie whether or not an ARM is the best re-financign option. However, isnce this is not possible homeowners have to either rely on their instincts and hope for the bets or select a less risky potion such as a fixed interest arte. A hybrid loan amy also work in the opposite way by offering an ARM for a certain amount of time nad then converting the mortgage to a fixed rate mortgage.

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