Money Saving Refinance
Tips
It can actually be quite challenging to know when the time is right to
refinance mortgage loans. It is a timing thing more than anything else. Get it right and you lock in very
favorable interest rates which will save you thousands of dollars over the life of the loan. Get it wrong and
you're going to pay a lot more money than you need to.
To add to our financial stress we also have to deal with the fact that many
lenders have greatly curtailed their activity due to the stressed economy. This is in fact the worst economic
crisis we as a nation have faced since the Great Depression ended in the 1930s. Credit lines are much more
difficult to come by now as compared to just a few years ago when it seemed as if anyone with a pulse could get
a mortgage.
When considering mortgage loans it is vital that you take into account how
much longer you plan on owning that property. All loan originations have fees that the lender charges. After
all, they are in it to make money. Examples of these fees include attorney fees and appraisal fees. There can
be more depending upon the lender.
The reason why this is so important is that even if you do manage to get a
more favorable interest rate which will lower your monthly payments, that savings could be wiped out because of
all the fees that you have to pay. With that said if you are planning to own the property you seek a mortgage
on for 10 years or more then it is probably a wise decision, generally speaking, to go ahead and
refinance.
If however you are planning to own the property for less than 10 years then it
may not be worth refinancing. Even though the interest rates will be lower, the fees to get the mortgage will
have pretty much negated your savings. That is why it is so important to carefully plan these things out and
seek your best options.
It is advisable that you use an online mortgage calculator which will allow
you to run different scenarios as far as interest rates and duration in years of the loans go. You can even
plug in the fees to get an idea of how your over all payments will compare to see if in fact it is in your best
interest to refinance mortgage loans.
There are, of course, two types of mortgages. There is the fixed rate mortgage
that locks in your interest rate for the life of the loan which is usually 15 years or 30 years. And there is
the adjustable rate mortgage (ARM) that typically begins with a very low interest rate but adjusts as the
Federal Reserve Board of the United States resets rates.
If you are going to be selling your property in the not too distant future
then perhaps an adjustable rate mortgage would be best. I must warn you to be careful. Many people are enticed
by the low interest rates at the beginning of an adjustable rate mortgage but soon find that they can no more
afford the payments as interest rates move higher.
Once again, do your homework and account for all possible scenarios before you
refinance mortgage loans. Whether you are planning to own the property you are mortgaging for just a few years
or for many, many years to come, you want to put yourself in the very best position possible to save
money.