Have you been considering a refinance of your mortgage? Now may be the time to act on it. If you have good credit and a high interest rate on your mortgage, then the mortgage crisis has, ironically, created an opportunity for you. You can benefit exceptionally well from a refinance if you bought property during the past couple of decades, when interest rates periodically soared.
Mortgage interest rates have dropped substantially over the past several months because the Fed has repeatedly lowered federal rates to stimulate the economy. Mortgage rates tend to trend up or down when Federal rates rise or fall, although the two rates are not tied together.
When you consider whether a refinance is right for you, here are a few questions to take into account:
* Will the extra fees wipe out the money you would save with a lower interest rate? There are a number of extra fees associates with a refinance. If the difference between your previous interest rate and the new interest rate is small, you may discover that the money you spend on fees exceeds your potential savings.
* In the same vein, does the new mortgage you are considering offer a longer term that will add extra interest payments to your final bill? If so, the added interest payments may offset any savings from the refinance, even if the interest rate itself is lower. Often, when people refinance, the bank offers them a mortgage with a longer term as well as lower interest rates, leading to attractively low monthly payments. However, because the interest has longer to accrue, the lifetime total of the loan may add up to even more money than the previous loan. A loan calculator can help you work out whether an offered loan really offers you savings. If the total comes out to more than the total of your previous loan, either pay more than the minimum each month to informally shorten the term of the loan, or do not refinance.
* Refinance with a fixed rate mortgage, not a variable rate mortgage. Even though the variable rate mortgages monthly payments may be lower than the fixed, rates are so low right now that you are less likely to benefit from a rate drop after the introductory period is over.
* Do not waste time waiting for interest rates to drop even lower before you refinance! Interest rates are already at a record low. If you wait to refinance, you may find yourself caught in a tide of rising rates. If rates do start rising, do not wait even longer in the hope that they will drop again. Grab a relatively low rate while you can. Refinance as soon as possible, and get a rate that is low enough to satisfy you, rather than wasting time holding out for an even lower rate that might never happen.
Even a weak economy has its bright side. If you weigh your options carefully, you can take advantage of the current economic situation, and refinance your house at considerable savings to you. Citation Mortgage loan ... Mortgage ... Mortgage rate ...

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by: marciafreeman
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