When Should You Refinance Mortgage Loans?
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by: marciafreeman
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Is right now a good time for you to refinance? Mortgage interest rates are almost as low as they can go in June 2009. It may seem like exactly the right time to trade in your high mortgage interest rate for a new mortgage with an appealingly low rate. Use the steps below to decide whether right now really is the ideal time to refinance.
* Call as broad a range of legitimate lenders as you can to get quotes. Choose the quotes with the best interest rates and lowest total fees.
* With a mortgage calculator, work out your total savings from each offer, plus the likely monthly payment.
* Find the break even point. That is the point in time at which your savings from the lower interest rate will equal the fees you paid to refinance your mortgage.
* How much longer do you plan to own the house? If the break even point falls before the date on which you plan to sell the house, then you will save money, and refinancing is a good idea. However, you will lose money if the break even point falls after the date when you plan to resell, so you should not refinance. Mortgage fees are nothing to laugh at, coming to at least $2,000 to $3,000 for an average refinance. Mortgage refinancing at a lower interest rate is no bargain if you lose more to fees than you save on interest payments.
These steps are effective whether you are trying to lower your monthly payments, or whether you want to pay less in total on your mortgage. If you need to reduce your monthly payments with a refinance, mortgage break even points will tell you if the real savings will be lower should you refinance. Mortgage break even points also tell you whether you would be better off reducing your monthly payment, or whether you would affect your wallet less by using the money you would have put toward refinancing fees to pay off part of your current mortgage instead. Otherwise, paying refinancing fees may be like throwing money down a hole.
Knowing when to refinance mortgage loans is essential to success in the real estate market. Its painfully easy and common to misjudge the timing or a refinance and lose several thousand dollars (or more) on the deal. Low interest rates often mean the time is right to refinance mortgage loans, but make certain the situation is ideal for you personally before you sign any agreements. Similar Entries Home mortgage ...
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