Refinance Your House During the Mortgage Crisis: Its Smarter than You Think
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by: marciafreeman
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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. A refinance can benefit your finances remarkably, especially if you bought your property during a high in interest rates.
Because the Fed has repeatedly slashed federal rates over the past several rates, mortgage interest rates are the lowest they have been in years. 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? A refinance may bring with it a number of fees. 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, the bank offers them a mortgage with a longer term as well as lower interest rates, leading to attractively low monthly payments. 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. 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 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 economic crisis has its benefits. If you weigh your options carefully, you can take advantage of the current economic situation, and refinance your house at considerable savings to you.
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