Should I refinance Now That Rates Are Down?

Mortgage rates today are at all time lows and refinancing mortgages has become very popular once again. If you know friends or family members who have recently purchased a home, candidly ask them what kind of deal they got. Now, gather them around and discuss to them what will happen for example: Tell them that a refinancing is simply paying off the old loan with a new one with more favorable terms. The lender will offer you new terms for the loan, including an interest rate that is considerably lower and not subjected to economic changes. With a reverse mortgage, you have the opportunity to use this type of mortgage even though your credit may not be stellar and you are unable to make large monthly mortgage payments. Refinancing will let you change an adjustable-rate mortgage to a fixed-rate mortgage or vice-versa.

If you have been putting off refinancing your mortgage because you have a bad credit rating, you should know that you can refinance and improve your credit rating at the same time. While persons who have a good credit history can get loans with an interest rate ranging between 5-7%, your interest rate will be significantly higher if your credit history is a poor one. Many homeowners build equity quickly due to rising property values and cash back refinancing is usually a more affordable option than a second mortgage or home equity line of credit. For example, if the properties you own have a market value of $200,000 but you still have a$100,000 balance on your first mortgage, you would then have a $100,000 equity line of credit.

If you anticipate live in your home for 5 years or less, than it may be both difficult and unwise to get a refinance. – If you will be living in your home for at least two or three more years, you should be able to overcome the costs of refinancing by lowering your mortgage interest rate. The cost of the refinancing will outweigh the savings gained by such a small rate decrease. One disadvantage to refinancing your mortgage is that you’re essentially starting over.

If your goal is to pay off your home faster, choosing a mortgage with a shorter term length will build equity in your home at a faster rate. If your goal is to build equity in your home as quickly as possible, choose a 15 or 20-year mortgage loan.

Build Equity in Your Home Faster

Many homeowners refinance their home loans to build equity in their homes at a faster rate. Should you go with an adjustable rate mortgage also known as an ARM or should you refinance into a loan with a fixed rate. Adjustable rate mortgages or ARM?s offer an initial lower interest than the current market rates. Balloon mortgages are short-term loans with fixed interest rates and fixed monthly payments.

Some people may find that their credit status has changed in the last couple of years. If you have poor credit, you will pay a slightly higher rate, but can still shop for a competitive mortgage rate among subprime lenders. Look at the fees that will be charged by the mortgage lender. Your approval status and loan terms including interest rate will be largely decided by the state of your FICO credit score. Your credit score is derived from a number of weighted factors. In these instances, refinancing for a lower interest rate will lower monthly payments, or provide homeowners with a fixed mortgage rate. , When you refinance a mortgage, you will go through a process similar to the one you underwent getting your original mortgage. The lender will have the final say on the amount of the loan after considering the borrower’s credit and employment history, income and previous debts. Another appraisal has to be done on your home to determine its current value and for the lender to be able to compute the amount of equity you have. These fees include your points, lender application fees, appraisal, title search, credit report fees, and any other administrative fees your lender lumps into the closing costs. You just need to discuss the facts with the lender you choose. When searching for lenders who Refinance Homes, be sure and check not only the interest rates but also the fees that each one charges.

Interest rates are still very low from a historical perspective. Even with these factors, you may still find that you will save money by refinancing.

Have You Done Your Research?

To see if refinancing makes sense for you, research mortgage lenders. With a fall in interest rates more people are eligible for refinance loans, as their principal and interest payments have fallen. If interest rates end up dropping much lower on mortgage loans in the distant future you will always have the option of refinancing again to get a better deal if you think it is worth it.