Mortgage Refinance Will Save You Money

If current interest rates are lower than your existing mortgage, a refinance is an excellent choice. A lower interest rate can result in substantial savings on your monthly payment. A word of caution - an extremely low interest rate in a 3 year ARM program should only be considered if you plan to sell or refinance again within 3 years. Remember, the goal is to save money and maintain your security and your home.



While interest rates are low, you may want to consider a cash out refinance. You can use the cash to pay off a car loan, credit card debt or do some major home improvements.

Another benefit of a refinance may be a shorter loan term. It is possible that with the lower interest rate, you can continue to make the same monthly payment for a 15 year term rather than your current 30 year term. This would save thousands of dollars in interest payments.

If you do not plan to stay in the home for a long time, you would benefit from a 5 year ARM or 3 year ARM.

Because there are so many refinance options, you must do your homework. An experienced mortgage broker can help you sort out the pros and cons of the various options and find the best refinance choice for you.

Of course, as we all know, things can change in the blink of an eye. It would be wise to give serious consideration to refinance while interest rates are low because they will, at some point, go up!

MORTGAGE RATES ARE DOWN BELOW 5%

October 1st, 2009 - It was reported this morning that mortgage rates have dropped below 5%. It is time to carefully consider a refinance of your mortgage.

As a consumer, competition among lenders can be a plus for you. It is wise to apply to several lenders for pre-approval to be sure you are getting the best possible deal. A word of caution - be sure the lender understands that this is pre-approval and your credit history should not be requested! Every time your credit history is checked, it adversely affects your credit score. Once you decide on a lender for the refinance, your credit history can be checked.

Be sure that your original mortgage does not contain a pre-payment penalty. A pre-payment penalty could eliminate the positive affect you are seeking. In other words, a large pre-payment penalty could make it difficult to justify a refinance of the mortgage.

As you consider the offers from the various lenders, you need to focus on both the interest rate and the closing costs. If the closing costs are excessive, it would off-set the low interest rate and eliminate any benefit to you.

Always get the interest rate and closing costs in writing from the lender. It is also important that you ask about any pre-payment penalty in the new refinance mortgage. All of this information should be included in the preliminary Truth in Lending disclosure prepared by the lender and provided to you in advance of closing.

In some situations, the disadvantages of a mortgage refinance outweigh the advantages. If you do not plan to stay in the house for a significant amount of time, you could lose money by refinancing. Another situation that could have adverse affects would be extending the term of the original mortgage from 15 years to 30 years would result in the payment of thousands of dollars in additional interest. This would definitely not be to your advantage.

Unfortunately, there are always scam artists in anything that involves money. There are predatory lenders. If you work with a legitimate mortgage company, this concern will be eliminated. If you have any doubts about the mortgage company, you should check with the Better Business Bureau.

UPDATED THOUGHTS:

With job losses and foreclosures continuing to rise, lenders may be much easier to work with to get borrowers into a lower payment and prevent future problems. Rates are still low so this is the time for ACTION!!