One of the common reasons to refinance a mortgage loan is to change the type of mortgage loan. For example, many home buyers choose an adjustable-rate mortgage (ARM) loan to save money during the first few years of homeownership. But in order to avoid the uncertainty of the ARM loan adjusting, these same homeowners will refinance their mortgage to obtain a fixed rate.

According to a recent survey from Freddie Mac, the majority of people who initially choose an ARM and later refinance the mortgage end up choosing a fixed-rate mortgage.

According to the survey:

“Borrowers who originally had a 1-year ARM, with interest-rate adjustments occurring on equal frequencies for the life of the loan, stayed with a 1-year ARM product 4 percent of the time when they refinanced in the second quarter of 2007, up from a 1 percent share in the first quarter and a 2 percent share a year ago.  Ten percent of 1-year ARM borrowers switched into a hybrid ARM product in this quarter, up from 8 percent in the first quarter of 2007.”

This pattern only makes sense when you think about it. People who have faced the uncertainty of an adjustable-rate mortgage once already rarely want to go through the process again.

On top of that, many homeowners who initially choose an ARM will go on to improve their credit score during homeownership, which allows them qualify for a  fixed-rate loan with a more favorable interest rate (better than the rate they initially qualified for when they first bought the home). In this scenario, the homeowners can refinance into a fixed-rate loan while still taking advantage of lower rates — a double benefit.

You can read the rest of Freddie Mac’s mortgage refinance survey on their website.

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