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Avoid mortgages with a prepayment penalty. Often in the small print, a pre-payment penalty can cost you thousands of dollars. It is meant to discourage you from refinancing your mortgage.

Fixed rate mortgage loans, in the current interest rate environment (2005) make the most sense, especially if you plan on living in your new home for several years. Rates are almost certain to rise in the near term. Even if they do not rise, an adjustable rate mortage's rate will rise. Most banks set the initial rate low in order to entice new borrowers. However, as soon as they get the chance, they will raise the rate. Right now, 30-year and 15-year fixed-rate loans are very low. It is also unlikely that rates will fall again to a level where refinancing is worth the fees and closing costs.

Today's fixed rates are at historic lows. If you get a 30 year mortgage for 6%, it is almost like living for free. You see, the U.S. government allows most people to deduct the interest on their taxes. If you are in a higher tax bracket, that 6% rate is really only about 4%. Moreover, home values in the United States have risen, on average, about 4% per year since WWII. This means your loan does not cost you anything! No wonder real estate has created so many millionaires!

Home Equity Refinance companies, reviews, and further research: