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[H1539]How To Refinance Your Mortgage

by Frank Elliot, Fra

There are signs the recession is ebbing and recovery is on the way. The $787 billion stimulus package aimed at injecting cash to the economy plus the conglomeration of smart and immediate government actions such as maintaining the Fed Funds rate between 0 and 0.25 percent.. The stock market is on the rise and is now over the 8,000 mark, the housing industry is also on the upward trend with the construction of homes and apartments jumped by 22.2 percent in February and the general consumer index is going positive.

With all these economic indicators pointing upward there is one question that any homeowner must answer. Is it time to refinance my mortgage? The housing industry after all is pinpointed by financial experts as the root cause of the current economic woes. Mortgage rates have all suddenly become unaffordable to a majority of homeowners and a large number of them are currently threatened by foreclosures. Refinancing can cancel the foreclosure notice and can give you thousands in savings with the lower mortgage rates currently being offered by lenders.

However with the election of President Barack Obama the government has made a lot of economically sensible decisions which lead to one of the lowest mortgage rates in US history. According to Freddie Mac, their weekly survey showed that the average rate on a 30 year mortgage increase to 4.87 percent from an all time low of 4.78 percent. Mean while Mortgage Bankers Association also revealed a similar trend by reporting that a 30 year fixed mortgage had increased to 4.73 percent from 4.61 percent.

Although the mortgage rate has increased it is still below 5 percent and most financial experts predict it will stay at this level. This low mortgage rate is attributed to a series of government actions such as buying back trillions of mortgage back securities and treasuries, providing $5 billion as incentives to mortgage industry who can modify their loans to lower rates and providing an $8,000 credit for first time home buyers as part of the stimulus package.

The low mortgage rates have enticed a lot of homeowners to apply for refinancing. In fact the Mortgage Bankers Association's index for refinance increased by 3.2 percent and Fannie Mae declared that it refinanced $77 billion worth of loans last month March. So the answer to the question of whether it is time to refinance or not is “now” is the time. With the mortgage rate hitting low and appears to be on the upward trend, the current rate seems to be a very good reason to refinance. Even President Barack Obama himself indicated that this is a good time to do so by declaring "we are at a time where people can really take advantage of this". This is in reference to an estimated 9 million homeowners out of which 12 percent are due to foreclosure and haven't availed of refinancing yet.

So there you go, even the US president himself is prodding you, now is the time. The waiting is over and now is the time to start doing your share of uplifting the economy by refinancing your mortgage now if it's makes financial sense for you to do so.

With interest rates near all time lows, many people are refinancing their mortgages. Chances are one of your friends or family members has recently refinanced and reduced their monthly mortgage payment. Refinancing a mortgage is simply taking out a new loan with different terms - hopefully more favorable ones. Because your new loan will have a lower interest rate and different terms, your mortgage payments could be considerably lower. In addition to having lower mortgage payments, you will have the opportunity to change the type of mortgage you have. You may also wish to change the length of your mortgage from 15 to 30 years, or vice versa.

Perhaps now you have a better credit rating than when you took out your original mortgage, which will allow you to get better terms this time around. Your credit history will also have an effect on your mortgage interest rate. Refinancing will allow you to build equity in you home more quickly, and you will also be taking advantage of the equity you have already built. If you previously mortgaged $100,000, and you currently have a payoff balance of $70,000, refinancing could dramatically lower your monthly mortgage payment.

Before you decide to proceed with refinancing your mortgage, there a few things you should consider:

How much longer do you anticipate living in your present home? - If you will be living in your home for at least two or three more years, you should be able to overcome the costs of refinancing by lowering your mortgage interest rate. If your move will be sooner, you may find that the cost of refinancing will outweigh the potential savings from the new, lower interest rate.

If your goal in refinancing your mortgage is to build equity in your home, you might want to consider changing the length of your mortgage. By changing from a standard 30 year mortgage to a 10 or 15 year mortgage, you will build equity much more quickly. Applying additional payments toward the principal will also allow you to build home equity at an accelerated rate.

If you currently have an adjustable rate mortgage, or ARM, you have an excellent reason to refinance. While ARM,s tend to have lower initial interest rates than fixed rate mortgages, with mortgage rates near all time lows, now may be a good time to lock in a low fixed interest rate.

Consider how your credit status may have changed since you took out the first mortgage on your home. If you were forced to take out a sub prime mortgage because of poor credit, you probably have a much higher interest rate as a result. If you have worked to successfully increase your credit score, you should take advantage of this change in credit status and refinance. Your interest rate and monthly mortgage payments could now be much lower. , When you refinance a mortgage, you will go through a process similar to the one you underwent getting your original mortgage. You will have a good deal of loan paperwork to complete, and the lender will examine your income, employment history, credit record, and the amount of debt you carry. They will also want an appraisal, as the value of your home may have changed, affecting the amount of equity you have. Some of the fees you will incur when refinancing include closing costs, application fees, title insurance, points, and the cost of the property appraisal. Be sure to discuss these fees with your lender before commencing with your mortgage refinance.

No one knows with 100% certainty what will happen to interest rates over the next several years; however, from a historical perspective they are presently a bargain. If you find that refinancing your mortgage could benefit you financially, do some research to find the lender with the best rates and terms. Then don't procrastinate; if interest rates fall further you can refinance again. In all likelihood, interest rates will rise in the not too distant future, and you may regret not refinancing when you had the opportunity.

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Both Frank Elliot & Gregg Pennington are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Frank Elliot has sinced written about articles on various topics from Finances. Compare (Certificate of Deposit Rates),