Refinance Home Mortgage – Money Saving Advice
If you have lived in your home for several years or more, it might be time to look into the refinance home mortgage option. As the housing market has slowed, the interest rates have fallen steadily and chances are you are paying a higher interest rate than you need to be paying. But there are many considerations involved in this decision. The refinance option always involves trade-offs and timing is crucial.
The last thing you want to do is go to all the trouble and expense of refinancing only to watch the interest rates fall further still. Knowing when to refinance your mortgage is always a bit of a gamble and at best an educated guess. Refinancing considerations have become more complicated since Fannie Mae and Freddie Mac got into their difficulties. Credit has tightened significantly and lenders have gotten very particular about who they will lend to and who they will do a mortgage refinance for.
Lenders are now requiring people who are considering a refinance to make clear how long they intend to stay in the home being refinanced. Lenders also charge refinancing fees that may diminish the benefits of a lower interest rate to the point where it isn’t worth going to all the trouble to do it. The fees charged by the lender may also determine what type of mortgage would be best for your current situation.
Mortgage interest rates are determined by the Federal Reserve Board and are based on the Fed Funds Rate. There are basically two types of mortgages to choose from for refinance home mortgage considerations. You can choose from an adjustable rate mortgage, commonly called ARMs, and a mortgage with a fixed-rate. The interest rate is the determining factor. With an ARM mortgage, the interest fluctuates with the changes in the Fed rates.
If you choose a fixed rate mortgage, your interest rate never changes. The most common types of mortgages are for either 15 years or 30 years. The length of your mortgage will determine two things. First, it will affect your monthly payment. Most people choose longer terms, to lower their monthly mortgage payments. The downside of a longer mortgage is the radical increase in the amount of interest you will pay over the life the loan.
When considering an adjustable rate mortgage it is extremely important to be aware of the changes that may and probably will occur in your monthly payment over the life of the loan. Every time the interest rate goes up, so too will your monthly mortgage payment. Many homeowners recently ran into problems when interest rates rose sharply and suddenly. They found them in a situation when it became difficult if not impossible to pay their mortgage because the size of the payment was beyond their budgetary limits.
In most cases, you will only benefit if you stay in your home for 10 years after you refinance. This is based on calculations that take into consideration the benefits of the lower interest rates and the expense of the refinancing.
The refinance home mortgage option is worth considering if you intend to stay in your home. There are some situations where it still can be beneficial even if you do not plan to stay put for 10 years. The best way to determine whether or not it is the option for you is to go on the internet and find a mortgage calculator. This tool can help you find the answer that is best for your particular situation.
