If you have been considering a refinance of your house, now may be the time to act. The mortgage crisis has, ironically, created spectacular opportunities for people with good credit and higher interest rates on their mortgages. 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. Although Federal rates are not tied directly to mortgage rates, lenders tend to adjust mortgage rates to follow the same upward or downward trends. When you consider whether a refinance is right for you, here are a few questions to take into account: * Will any savings from a lower interest rate be offset, or surpassed, by the charges from refinancing fees? 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. * Similarly, will a longer loan term add enough extra interest payments to completely offset the savings you might have gotten through a lower interest refinance? Often, when people refinance because they want lower monthly payments, the bank offers them a mortgage loan with a lower interest rate as well as a longer term. The result is a temptingly low monthly payment. However, the extended term also allows more interest to accrue. Use a loan calculator to determine whether you are really saving money, and if you are not, either decide to pay more than the minimum each month, or do not refinance. * Avoid variable rate mortgages when you refinance. Variable rate mortgages generally offer lower monthly payments than fixed rate mortgages, but you are likely to lose the benefits of the low interest rate when the economy booms and Federal interest rates rise again. * Do not wait for rates to drop lower before you refinance! Interest rates are reaching record lows already. 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 and lock in a lower rate as soon as possible, getting an interest rate that saves you a good amount of money, rather than sitting on an expensive mortgage in the hopes that you will be able to save even more money. Even a weak economy has its bright side. With careful consideration of your options, you can take advantage of the current environment, and refinance your house at an excellent interest rate.
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