 
| Mortgage Rates Are Setting At 50 Year Lows |
| Date Posted: 2010-07-09 |
| Posted By: Admin |
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| It's been almost 10 years since I signed the dotted line and started living the American Dream. That's right, I gave up renting and became a first time homebuyer. At that time, mortgage interest rates were setting at around 7 percent and that rate was lower than interest rates had been in over 30 - 35 years. People were refinancing existing mortgages like crazy, as most people that purchased a home in the 1990's or before were financing their homes at rates of 9 percent or higher. With interest rates that low, I started getting the old buying itch and at that time and I didn't figure rates would go down much further, so I started researching properties and found the one I wanted and I bought it. I have since refinanced my home and locked in a fixed rate just above 5 percent and now interest rates have fallen again making them the lowest on record since Freddie Mac started tracking mortgage rates in April 1971. | | So, how do you know if refinancing a mortgage to a lower interest rate is the right option for you? Well, if you are considering whether to refinance an existing mortgage, there are a couple things that you should answer before considering on whether to refinance an existing mortgage:
1) What are the current interest rates on mortgages?
Refinancing an existing mortgage just to get a lower interest rate should be considered if you can get an interest rate that is at least one full percentage point lower than your existing mortgage. In most cases, if current interest rates are not at least one full percentage point lower, then there will not be enough savings to justify paying the fees associated with refinancing.You can view current Mortgage Refinance Rates by clicking here.
2) How long are you planning to stay in your home after refinancing?
Once you know what the current interest rate on the mortgage will be, the next thing you have to be able to answer is how long you plan on staying in your home after you refinance. When using a calculator to see if refinancing an existing mortgage is right for you, the results will be given with a 'break even point.' The break even point is the amount of months that you would have to stay in your home after refinancing to make the monthly payment savings offset the closing costs associated with refinancing your mortgage. You can use our Mortgage Refinance Calculator to help you calculate whether or not refinancing your current mortgage will save you any money by clicking here.
3) How long have you been in your existing mortgage?
If you have been paying on the same mortgage for a long time, then refinancing your existing mortgage may not be the best option for you. Looking at the amortization chart of your mortgage will show you the breakdown of your mortgage payments and how much of your payment will be credited to the principal and how much will be credited to the interest portion of your loan. In the later years of your mortgage, more of your payment will be applied to the principal portion and less to the interest building more equity. If you refinanced late in your mortgage, the amortization process would be started over - most of your monthly payments will be applied to the interest portion again, meaning building equity would be slower again. To view the amortization schedule table on your existing mortgage clicking here.
4) Does your existing mortgage have a prepayment penalty?
A prepayment penalty is a fee that mortgage lenders may charge you if you pay off your loan early, which would include refinancing your mortgage. Not all lenders charge a prepayment penalty, but if your lender does ask if the penalty can be waived. If the penalty can not be waived, you must consider the costs of the penalty against the savings you expect to gain by refinancing. This penalty will increase the time that it will take to reach that break even point. | | | As with your existing mortgage, if you choose to go forward and refinance your existing mortgage, there are fees associated with refinancing. It is not uncommon for these fees to be 3 - 6 percent of your the outstanding principal balance. Refinancing fees can vary from state to state and lender to lender. With all of this in mind, the first lender that you should talk to about refinancing your existing mortgage is your current lender. Generally, lenders will work with you to keep your business and besides being able to offer you a lower interest rate, sometimes your current lender may be willing to eliminate or reduce some of the typical refinancing fees. In addition to talking to your current mortgage lender about refinancing, you should still shop around and get offers from several other mortgage lenders or brokers. This will help ensure that you are getting the best mortgage terms, which can end up saving you thousands of dollars over the life of the loan and always make sure you get all of the information in writing about each loan you are interested in before paying any nonrefundable fees. It is important to read this information and ask the lender about anything you don't understand. |
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