Refinance Home Mortgage Guide

As you have seen over the last year, mortgage interest rates are rising constantly. If you find yourself in a situation where you need to refinance a mortgage there are steps you can take to secure a better interest rate. The simplest step is prepaying points on your new mortgage loan.

In mortgage terms, a point is equal to 1% of the mortgage amount. This is a fee you will pay at closing to receive a lower interest rate. A zero point mortgage loan will always have a higher interest rate than a loan you pay points for. Pre-paying points on your new mortgage is a trade off: you pay a fee upfront for a lower interest rate over the term of the mortgage loan.

Whether or not you should pre-pay points on your new mortgage depends on how long you plan to keep the mortgage. If you are going to stay in your home with this mortgage for at least five years it would benefit you to pre-pay points. If you think moving or refinancing may be in your near future you may be better suited for a zero point mortgage.

Mortgage lenders will let you choose from different mortgages with varying interest rates and points; be sure you compare the different combinations along with the mortgage terms before choosing a loan.

Refinancing your mortgage with a bankruptcy on your record is not an impossible task. Since your home is used as collateral on a mortgage loan, lenders are more prone to work with people that have poor credit or recent bankruptcies. Refinancing your mortgage loan can even help improve your credit score.

The best way to re-establish your credit after a bankruptcy is to obtain credit. Opening a credit card is a simple way to do this. As long as you use the credit card responsibly and make payments on time your credit will improve. It is important that you keep your balance low and make your payments on time. After you have established a positive credit rating it is important to monitor your credit report. The credit reporting agencies make mistakes; you want to make sure your credit report is accurate.

Another way to improve your situation when refinancing is to put some money away. If you are able to pre-pay points on the mortgage you will receive better terms and interest rates for your new mortgage.

After nine consecutive weeks of rate hikes, mortgage interest rates leveled off this week. This has been the longest running streak of mortgage interest rates for the past eighteen years. This week the average for a 30 year fixed interest rate mortgage loan held fast at 6.42%. This time last fall this mortgage rate stood at 5.76%. Fifteen year fixed interest rate mortgages did not fare as well; this mortgage interest rate rose 3 points to 5.99%. According to one survey of national lenders this interest rate has not gone down since August. It has gone up every week since the end of August.

One possible reason for the lack of an increase is favorable news about inflation. The bond market reacted to favorable news from the government regarding the Consumer Price Index and mortgage interest rates remain unchanged.

The number of mortgage applications in the United States dropped again last week as mortgage interest rates reached a 17 month high. Meanwhile, the number of people refinancing their mortgage loans has also dropped to the lowest level for the year. According to a survey of national mortgage lenders refinancing activity dropped .6% last week. Interest rates for 30 year fixed mortgages averaged 6.33% last week. This is up .02% from the week before. This interest rate is the highest recorded since June of 2004 when interest rates averaged 6.34%. According to this national survey, new home purchase applications are up for the second week in a row. In spite of this, new home applications are down from their levels this time last year.

Interest rates for 15 year fixed rate mortgages averaged 5.87% last week. This is up from 5.85% the week before. Adjustable rate mortgages, called ARMs, are up to 5.46% for a one year mortgage. The previous week a one year adjustable rate mortgage averaged 5.45%.