Grab the Low Rates and Refinance

The end of November, the average interest rate on a thirty year fixed rate mortgage was around 5.5 percent. It was the most drastic weekly rate decrease in almost 30 years. The federal government has designs to drop the rates even lower for home buyers, and the same trend may drop rates for homeowners who would like to refinance. Many homeowners are jumping on the bandwagon to refinance. The last week in November showed a 200 percent increase in refinance applications from just the week before. Many who have chosen to recently refinance are trading in an adjustable rate mortgage for the peace of mind of a fixed rate mortgage. Others wish to refinance to simply get a better interest rate or terms to save money on their monthly payments. The rates may be enticing, but banks have also tightened their lending practices. That means that many who applied to refinance were not approved. Lenders are requiring higher credit scores and higher down payments. Additionally, a growing number of homeowners no longer have enough equity in their homes to refinance, due to drops in home values.
The low interest rates will continue to entice consumers, particularly those looking to refinance. While many mortgage holders are grabbing the current round of low interest rates, others are waiting to see if the rates will drop further. Just as rates go down, rates can go up and you could miss a golden opportunity to refinance. Many financial experts think that if you are considering a refinance, it would be wise to take the current low rates. If you are wondering if a refinance makes sense for you, the simplest thing to do is calculate your savings and costs for the time you plan to hold the mortgage. Figure out how much you would save on your monthly payments with the new interest rate. Then, add up all the costs of the refinancing. The last step is to calculate when you would earn back any refinance expenses incurred, by dividing the costs by the savings. That total number of months is known as the "break even point." If you plan to be in the house later than your break even date, it is probably worth trying to refinance. Say, for instance, your break even date would be 18 months from the time of your refinance. If you expect to sell the house in a year, then the refinance may not be a good financial move.
It is hard to predict what will happen with mortgage interest rates. If you would like to refinance, it may advantageous for you to lock in the low rates now and not gamble that they will drop enough to make a big financial difference for you.
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by: marciafreeman
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Research on refinance, see www.getsmart.com.

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