How to Refinance a Mortgage

If you have an adjustable rate mortgage, recent interest rate hikes mean your payments will soon go up. Traditional 30 year fixed rate mortgages are averaging near 6 percent; you can still get a good deal before your monthly mortgage payments go up. If you’re not sure how long you will be in your current home, you can still take advantage of low interest rates without signing up for a 30 year deal.

You can do this by looking at hybrid Adjustable Rate Mortgages such as the 5/1 ARM. This Hybrid Adjustable Rate Mortgage loan offers a fixed interest rate for 5 years. After the five year period the interest rate will be adjusted every year. There are many other types of hybrid loans. These loans are all designated with the same format: fixed period/adjustment period. Popular flavors of hybrids mortgages include 5/1, 7/1, and 10/1 loans.

Keep in mind the interest rate you receive will depend on the length of the periods you choose. The higher these values, the higher your interest rate will be. Before signing up for one of these mortgage loans you need to understand any lender fees associated with the loan. By negotiating with your lender for things like no prepayment penalties you may be able to avoid these fees. Getting a loan without these lender fees will allow you to easily refinance or sell 5 years down the road without losing money.

When comparing mortgages loans from different lenders it is important to use the Annual Percentage Rate (APR). By using this APR you will be comparing apples to apples and you will be able to choose the better loan.

The Federal government requires mortgage lenders to disclose all fees associated with their mortgage products in the form of the Annual Percentage Rate. As a homeowner looking for the best mortgage deal, you can use the APR to gage the true cost of each loan. The Truth in Lending Act was designed to prevent mortgage lenders from hiding or disguising their fees.

When comparing loans make sure you are comparing mortgages of equal term length. Mortgages with 5 year term lengths will have a higher rate because they are amortized over 15 years; 30 year mortgages have their fees amortized over 30 years. Mortgage lenders often include pre-paid interest in their APR figures; make sure you read the fine print. If pre-paid interest is included in their figures you will have to pay a certain amount up front to qualify for that rate.

Lastly, the APR from your lender doesn’t factor in penalties or balloon payments. It does not guarantee how long your interest rate will remain unchanged. APR disclosure is a good guideline when shopping for a mortgage, but it should not be your only deciding factor when selecting a mortgage.

Mortgage interest rates dropped this week after four weeks of rate increases. This is according to a survey conducted by one national mortgage lender.

Traditional 30 year, fixed rate mortgages fell to 6.26% this week; this is down from 6.28 the week before. Fixed rate 15 year mortgages average 5.89% this week, down from 5.91% last week.

A one year Adjustable Rate Mortgage (ARM) averages 5.32% this week; down from 5.36% last week. At this time last year traditional 30 year mortgages averaged 5.69%. The 15 year fixed interest rate was 5.22% this time last year, and one year Adjustable Rate Mortgages averaged 4.16%.

Analysts expect interest rates to continue to rise throughout 2006. As a result of this they are predicting a cooling in the US housing market.

If you are a homeowner with a poor credit rating, you may think refinancing to a lower interest rate is out of your reach. Years ago, a poor credit rating would prevent you from financing your home. Today however, mortgage lenders are desperate to keep the housing boom alive, and you can take advantage of this to improve your credit and your monthly payment. You can lower your monthly payment and cash out equity in your home at closing to pay off other high interest debt.

If you are a homeowner with an adjustable rate mortgage you should consider refinancing now to a fixed interest rate mortgage. This is doubly so if you financed your home with an interest-only or option mortgage. If you are under one of these risky mortgages, financial disaster could be waiting for you around the corner with today’s market and economic conditions. The Federal government is even warning lenders and consumer groups about the dangers coming for homeowners.

For most people this is the best time to refinance a mortgage. Interest rates are still at historically low levels, making it an excellent opportunity to refinance to a fixed rate mortgage. Additionally, refinancing could help you eliminate the additional expense of private mortgage insurance if you are currently paying it. In order to find the best deal for your refinancing dollar, you need to do your homework and understand the industry and how mortgages work. Our free guide to mortgages and mortgage refinancing will teach you mortgage terminology, help you understand how the market influences interest rates, and how to negotiate with your lender to get the best deal for your individual situation. Mortgage lenders know what their doing, that’s their business…Shouldn’t you?

To learn more sign up for our free guide: “Five Things You Need to Know Before Refinancing Your Mortgage.”

If you are currently have an adjustable rate mortgage your payments will be going up due to interest rate hikes. It would be a smart move to refinance now when interest rates are low. This will lock you into a mortgage where your payments will not increase.

If you are considering cashing out equity in your home to pay off bills such as high interest credit cards now is the time. Consolidating your bills into one monthly payment with the tax advantages of your mortgage can save you thousands of dollars. Interest paid to your credit cards is money lost to you; interest paid on your mortgage will come back to you in the form of your tax deduction.

Interest rates are still at historic lows; you can refinance to a fixed interest rate around 5.75%. Mortgage lenders are desperate for your business and you may even be able to refinance you current loan at no cost. If you are in a mortgage that is currently negatively amortized you should run not walk to your mortgage broker. These “interest only” and “option” mortgages that have been so popular are starting to adjust to current market conditions. This adjustment is bad news for homeowners that will see their monthly payments shoot up.

If you are a homeowner paying on a first and second mortgage this is the time to refinance; especially if you have equity in your home. Second mortgages always carry higher interest rates and home equity lines of credit can be a nightmare.

If you have decided to refinance your home make sure you have a current appraisal on your home. Keep track of what other properties in your neighborhood are selling for. Your appraisal will use these values for similar homes up to 1 mile away from yours. The current value of your home will impact the equity you have and your corresponding interest rate. To learn more about refinancing your home sign up for our free guide to mortgages and mortgage refinancing.