A fixed rate mortgage maintains its monthly payments consistently, regardless of the current state of the economy and mortgage market.  The alternative, an adjustable rate mortgage, fluctuates based on the market.  This can be good or bad, depending on the market, and is a bit of a gamble.  A fixed rate mortgage, on the other hand, is relatively safe.

Because they are considered “safe” and are so consistent, it helps financial planning and is good for first time buyers who are new to having a mortgage. Adjustable rate mortgages can end up demanding surprise high payments that leave you scrambling to make ends meet.  However, because of the stability, fixed rate mortgages will often have higher interest rates than their adjustable counterparts.  A fixed rate mortgage also requires a higher credit score than an adjustable rate mortgage.  However, if you are not planning to live in your home for at least 5 years, a fixed rate mortgage may have too high interest rates to suit your needs.

It is wise to refinance to a fixed rate mortgage if interest rates are rising and you find yourself paying more and more each month. Especially in the state of Michigan, in this historically low market, fixed rate mortgages are advisable as locking in these rates can only benefit you down the road.

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Most people look at the Michigan mortgage market to determine when the best time is for refinancing their mortgage.  While this is certainly a valuable and influential aspect of the decision, one must consider other local and personal factors in their decision making process to ensure sound financial planning.

One thing to pay attention to is your credit score.  If your credit score increases significantly and quickly, it may be time to look at refinancing.  This can lower your interest rates as well as your monthly payments.  Even if you are unsure if your credit score has changed enough to make a significant difference, it is certainly worth looking into and seeing if you can save yourself some money in the long run.

If your monthly payments are ballooning upwards because of your adjustable rate mortgage, it might be time to consider refinancing and switching to a fixed rate mortgage that offers some stability with its locked in rates.  In Michigan, where mortgage rates are incredibly low because of the economic downturn, fixed rate mortgages offer a lot of potential benefits.

Another reason for refinancing could be that you have more money available to you.  Whether it is from paying off college loans, credit card debt, or an inheritance, having more money available could allow you to refinance from a 30 year mortgage to a 15 year mortgage.  This would raise your monthly payments, but would also allow you to pay off your mortgage in its entirety much sooner than if you stayed with a longer term plan.

These are just a few reasons why you may want to think about refinancing.  Consider all the options and talk to a professional for advice.  It could be just what you need given changes in your financial situation.

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