As you shop for a mortgage to finance the purchase of your home, you generally want to avoid obtaining a high interest rate loan. Loans with a high interest rate ultimately result in you paying more total interest on the loan than a low-rate one. Since the interest you owe on a loan is figured into your monthly mortgage payment, a high interest rate loan can lower the amount of money you can borrow. When market conditions are fairing badly, you may not be able to avoid a high interest rate mortgage. You do have the option, however, of refinancing your loan when interest rates go down. Refinancing involves renegotiating the terms of your existing mortgage or obtaining an entirely new one to secure a better interest rate. Though lenders charge fees for refinancing, it can still be worthwhile, especially if the current market rate is at least two percentage points less than your loan. Keep in mind that some types of mortgages carry higher interest rates than others. Typical high-rate mortgages include sub-prime loans for borrowers with credit history problems and jumbo loans that exceed the maximum loan amount established by government regulations.
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