Mortgage Refinancing: Is Now the Right Time?

Mortgage refinancing is a long and complicated process that can cost you money in the short run, but save you tens of thousands in the long run. When is a good time to consider refinancing? As of May 2009, interest rates are at a record low, but is that alone a good reason to refinance?
First, has the average market rate for mortgages dropped two or more points below what you are paying on your mortgage? Mortgage refinancing can easily cost you two to three thousand dollars or more in fees, so it is sensible to refinance only when mortgage refinancing would save more than you spend. For the average homeowner, cutting the mortgage interest rate by at least two percent creates enough savings to cover the cost of the mortgage fees.
Second, how long do you plan to stay in the house? If you will be living in the house for years to come or you plan to own it long term as a rental property, then mortgage refinancing makes sense. On the other hand, if you are within a few years of the date you plan to resell, refinancing is not a good option. The exception is when you are leaving shortly, but in the meantime you need much lower monthly mortgage payments. If this is your situation, a non amortizing mortgage may be a good choice for you. Non amortizing loans are designed with a grace period of three to seven years during which the monthly payments cover only the interest on the loan. The interest rate would shoot up after the grace period, but if you timed the sale of your house to fall before the end of the grace period, you would not need to pay the higher rate.
The best way to decide whether its time for mortgage refinancing is to sit down with a mortgage calculator and calculate the break even point. This is the date on which the amount you save on a new mortgage equals the amount you spend to refinance. If you plan to still own your house on the break even date, then it is a good idea to refinance. On the other hand, if the date falls after the time you plan to sell, or is so close to the date that the savings are too small to make a difference, then you should not refinance.
Mortgage refinancing takes time, effort, and money, so it is not to be undertaken lightly. Do not refinance just because interest rates are low. Calculate what you are likely to save, and decide whether the time is right for you to do a mortgage refinancing. Other articles Mortgage rate | Mortgage rates | Mortgage loans |

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by: marciafreeman
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Find more related to mortgage refinancing, go by www.getsmart.com/refinance.

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