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Mortgage Refinance Rates

When Should You Refinance?

Refinancing is when you currently have a mortgage on your property and are seeking to apply for a second loan in order to pay off the first mortgage. Refinancing carries with it a lot of fees, so it is important to weigh those in the equation when deciding whether or not refinancing is the fiscally smart thing for you to do in the end.

Sometimes refinancing can carry with it tremendous benefits, giving you some extra cash while at the same time reducing your monthly mortgage payments. This only applies if your home has already earned equity, that is, if you have already paid down much of your first mortgage or if your property value has risen considerably since you first purchased the home.

In addition, if the lending climate when you obtained your first mortgage dictated high interest rates, it is possible that the current lending climate is more favorable to borrowers, and thus you could obtain a mortgage with a rate that is much lower than the one you have now. A good time to refinance may be when the Federal Reserve is slashing interest rates. Lower interest rates will lower your monthly mortgage payment and also the amount that you ultimately end up paying for your home.

You could also shave years off of your mortgage by refinancing if you choose to maintain your current monthly mortgage payments but obtain a second loan with an interest rate that is considerably lower than the one your currently have.

Another reason to refinance is to trade an adjustable interest rate for a fixed interest rate. Adjustable rates mean that your interest rate may rise over time. This could significantly increase your monthly mortgage payments virtually overnight and render a previously affordable monthly payment no longer affordable. A fixed interest rate is basically security - security that you will be able to afford your mortgage payments tomorrow as well as today.

And of course, if you were able to take advantage of any equity you had built up in your home, refinancing can provide you with a surplus of extra cash. Maybe you have your eye on an expensive remodeling project, or maybe you need a new car. Whatever the reason, refinancing can provide you with the means to purchase these things.

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