Do not skip the idea of refinancing your home mortgage. Time is now to take action or you may miss the bus. Going by the trends of the recent years, every time Federal Reserve Board Chairman Alan Greenspan opens his vocal shutter, the interest rates go up. If not by a substantial margin, then at least by 25 basis points.



A quarter of a percentage point may not seem a hefty jump given the fact that current federal funds rate is pegged at 2 •¾ per cent. But this conclusion is erroneous. For when did you pay an interest rate of 2 •¾ per cent on anything? When did your credit card company ask you to pay an interest rate of over 2 per cent? You must answer these questions and then look at your home mortgage possibilities to get a complete picture of credit scenario. It's a well established fact that the federal funds rate and home mortgage rates have a co-relation and right now federal fund rates are moving northwards.

You may feel that you have missed the opportunity of subscribing to the lowest rates instruments of near future. But all is not lost. There is still some time to opt for better refinancing scheme. But if you want them, give up your laid back attitude.

Refinancing: Basic Premise

A small rate cut can be adjusted through monthly mortgage payments in smaller instalments. This, in turn, will bring down your tax deduction levels. This point must be taken in consideration because nobody needs to tell you what your savings mean to you. You can further bring down your cost by asking for complete waiver or reduction in fees charged on application fees, origination fees, appraisal fees, legal fees, etc. If you are not in a position to make cash down payments, you can get it added to the mortgage figure.

A short mortgage term, say of 15 years instead of 30 years, may entail paying a higher interest on monthly payment. But in the process, the payment burden will get off your head sooner and your ownership rights will be transferred in a shorter period.

Standard mortgage terms are normally in the range of 15 years to 30 years. If your preference is a term which is shorter than the maximum limit and longer than the shortest limit, you can ask opt for a custom loan. This instrument facilitates you to designate a new term that suits you. You need to ask for a term that could create a right balance between a term less than 30 years and monthly payments on a lower side than those given out in a 15-year mortgage.

If for some reason, custom term is denied to you, opt for a 30-year mortgage and you could pay more than the monthly payment to clear your debts as soon as possible. Of course, it will depend upon your own monthly income and expenses equations. You should also not forget to negotiate in the beginning itself that no pre-payment penalty is imposed on you in the future.

Where and how to begin

You need to get your credit record reviewed with each of the three credit bureaus: Equifax, Trans Union and Experian. Often they may furnish reports littered with shocking mistakes like credit charges of accounts that are not yours, an identity mistake or even the balance details which are not in sync with your statements. Get them corrected.

Compare mortgage rates and fees online offered by several finance companies. Depending upon your analysis, subscribe to the services of a good mortgage calculator. It will tell you in precise terms as which loan instrument is the best for you in the given circumstances.

So now is the time for you to wake up to the refinancing possibilities. The hard negotiator in you needs to emerge to strike a best possible deal with the refinancing companies. Remember, it's a two way game out there: these companies need you as badly as you need them.