One more type of mortgage is the balloon mortgage. This is often taken for a short period of time. Here, the borrower repays part of the loan in monthly installments over a period of 5 to 7 years. At the end of this period, the remainder is to be paid off in a lump sum. The borrower also has the option of refinance for repayment of the remainder. He can select the amount of money to be repaid at the end of the period; some lenders even provide an option to vary the interest rates.

You can find an online mortgage calculator at most Internet loan sites. Although refinancing may seem like found money, particularly if you are tapping the equity for cash, remember that it will have to be repaid like any other loan.

You can refinance more than once - and sometimes save an extra percentage point or two of interest rate when all is said and done. We tried this and now use the difference to build our savings.

The missing link in all of this is how long you’ve held your current mortgage. Because you will be starting all over again with a brand new mortgage, the longer you have had your present loan, the less advantageous it is to refinance, especially if the difference between your old and new interest rate isn’t significant.

Your choices now are probably just as wide as when you obtained your original loan, possibly even more so. There are fixed-rate loans of 15 and 30 years. There are adjustable-rate mortgages with varying adjustment periods. There are government loans - Federal Housing Administration (FHA) and Veterans Administration (VA) - conventional loans and jumbo loans (loans for more money than the conventional loan limit). There are loans which require private mortgage insurance (PMI) and combination first and second mortgages which eliminate the need for PMI.

Designed primarily to give less creditworthy borrowers a chance to prove they can make mortgage payments on time and over time, the loan comes with annual interest rate decreases spread out over a couple of years. After a few adjustments down, the rate becomes fixed. You must make all payments on time, maintain a good credit standing and not fall below the income level you listed on your loan application.