When Is a Good Time to 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.
* Get as wide a range of quotes as possible from legitimate lenders. Select the ones with the lowest interest rates and total fees.
* Use a mortgage calculator to determine the total savings you would reap from each refinanced mortgage, plus the new monthly payment.
* Calculate 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.
* When do you plan to sell 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. If the break even point falls after the date on which you plan to sell the house, then you will lose money, and 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 will not save you money, no matter how low your new interest rate is, if you lose more to refinancing fees than you gain from lowering your interest rate.
This method works whether you want to save money on your total mortgage payment, or whether you want to lower your monthly payment and do not mind paying more in the long run. 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 determine whether you would save money by lowering your monthly payment, or whether you would be better served by putting the money you would spend on refinancing fees toward your current mortgage payments.
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 topics Mortgage | Home mortgage |
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