Refinance Home Mortgage – Money Saving Advice | Home Mortgage and Refinancing

Refinance Home Mortgage – Money Saving Advice

Filed in Refinancing Home Mortgage on Aug.31, 2009

It really is rather difficult to know when the time is right to refinance home mortgage. It really seems to be a matter of timing as much as anything else. For instance, if mortgage rates are at the lowest point that they have been in quite a few years it would seem that it would be a good time to refinance and lock in the favorable interest rates.

The question always exists, “what if the rates go lower?” When is the best time to refinance? The last thing you want to do is refinance your mortgage and then have the rates go even lower. Since the housing bubble burst many lenders like Freddie Mac and Fannie Mae got left holding the bag, so to speak. As a result credit has tightened up considerably and new issues in refinancing have arisen. It may be difficult to find a lender something that wouldn’t have been a problem in the past. Lending agencies are really picky now as to whom they will give a new mortgage to.

Now when you got to a lender to refinance your mortgage you require that you establish how long you will be staying in your home. As before, lenders charge fees that can make the benefits of refinancing completely vanish. The various fees and costs will have an impact on your decision as to what type of mortgage to obtain as well.

When considering the refinance home mortgage option, you will want to take a look at the different types of interest rate structures offered by lending institutions. The basic interest rate charged by lenders is set by the Federal Reserve Board and it is based on the Fed Funds Rate. This rate is what determined the rate of a fixed-rate mortgage, where the rate set is the rate you will have for the length of the mortgage. The ARM option, or adjustable rate mortgage, carries an interest rate that fluctuates as the Fed’s rate changes. There are outside limits, but nonetheless, it will have an impact on your monthly payment.

Most lending institutions offer a 15 year mortgage and a 30 year mortgage. In all cases, the shorter the length of the loan, the lower your monthly payment will be, but the more interest you will pay over the life of the loan. Whenever possible, it is to the mortgage holder’s advantage to go for a shorter loan rather than a longer loan, if they are able to afford the monthly payments.

Recently quite a few homeowners have found themselves in trouble as far as paying for their adjustable rate mortgages go. An ARM will have very low interest rates at the inception but when it resets or adjusts after a set period of years they can become very expensive. Many borrowers don’t realize this or are ill prepared for it when it happens.

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.

If you are going to be in your home for less than 10 years it still may be profitable for you to refinance but now you should look into an adjustable rate mortgage to take advantage of the lower interest rates. There are mortgage calculators available on the Internet that you can run different scenarios through to see exactly what your payments will be. By using this tool you will know whether or not is a wise decision to refinance a home mortgage.

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