Historically Low Rates and Mortgage Refinancing

The Federal Reserve announced this week that they were cutting interest rates offered to banks to almost zero. The hope is that low rates in the current struggling economic times will encourage both lenders and borrowers. In response, interest rates for mortgages have fallen this week to the lowest point since 1971. The average rate for a 30 year fixed rate mortgage dipped to 5.19. The rates have been falling for seven weeks in a row. The drop in rates has encouraged many current homeowners to apply for mortgage refinancing. But banks are not lending as easily as they were a year ago. The recent credit crisis caused them to tighten their lending standards. That means that not as many applicants for mortgage refinancing are being approved.
Rates are at record lows, but lenders are now more risk averse. They are examining credit reports more closely and will only approve consumers with high credit scores. Approval for mortgage refinancing today requires that applicants have cleaner credit histories and better credit scores than in the past. In addition, home values have decreased strikingly in most markets across the U.S. That means that those homeowners now have less equity in their homes. An updated appraisal of the property is usually necessary for any mortgage refinancing. When those appraisals are done, some consumers are told that their properties are worth less than their mortgages now. Obtaining approval for mortgage refinancing will be challenging for those homeowners. In spite of the new lending restrictions, there are many consumers who will still meet the criteria for mortgage refinancing. If you are considering refinancing, analyze your budget and financial plan to figure out if now is the time to do it. The first step is to calculate the costs you will incur to refinance. For example, sum up your estimates for costs of attorney hours, appraisers and document filing. Make sure to include any penalty fees for paying your original mortgage off early. Next, work out how much you would save each month on your mortgage payment under the new interest rates. Thirdly, calculate how many months it will take to actually start saving (know as your "break even" date), by taking the cost of the refinancing and dividing it by your monthly savings. Last, determine how long you anticipate owning the house. Mortgage refinancing may not be the best choice, if you plan to sell the house before you reach that break even date. More information Mortgage refinancing Mortgage loans Mortgage loans Mortgage refinancing Mortgage calculator

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by: marciafreeman
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Find more information about equity loans, read www.getsmart.com/refinance.

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