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In the Market to Refinance a Mortgage?

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To put rising mortgage interest rates into proper perspective, compare interest rates today with those who financed their mortgages back in the 1980s. Those people will tell you they paid 15 percent interest for their 30 year fixed interest rate mortgage and were happy to do so. Stop whining about mortgage interest rates. With this in mind it is still easy to feel nervous about rising interest rates. A 30 year fixed interest rate mortgage loan is up to 5.98 percent this week. While this is low historically, it is still the highest mortgage interest rates have been this year. Interest rates for other types of mortgage loans have edged higher also. Mortgage interest rates on one year adjustable rate mortgage loans (ARM) are up to 4.77 percent; this is the highest they have been since the spring of 2002. Interest rates for a five year hybrid ARM are up to 5.48 percent this week which is the highest rate this year. Hybrid adjustable interest rate mortgages typically offer low introductory rates before adjusting to the prevailing mortgage interest rate.

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What is a person refinancing a mortgage to do?

First, don’t panic. The mortgage industry anticipates interest rates on the typical 30 year fixed mortgage will remain near 6 percent for the rest of the year. If you are in the market to refinance you still have time to shop around. Mortgage borrowers who refinance sooner rather than later will probably get a better rate, but there is no reason to panic, at least not yet. Second, if you are in the market to refinance a large mortgage, shop around for a lender that has raised their lending limits for a conforming loan. Interest rates on conforming mortgage loans are typically a quarter to three quarters of a percent lower than interest rates for other mortgage loans. Next, don’t take risks to get a lower interest rate. Adjustable rate mortgages (ARMs) really don’t lower you payment much at the moment. For a $250,000 mortgage loan, for instance, taking out a five year hybrid adjustable rate mortgage loan would only save you $60 per month. The risk associated with this loan is not worth $60 a month.

Current mortgage interest rates may push some to sign up for mortgages with low introductory teaser interest rates with flexible payment options. Beware these types of mortgage loans; you could wind up under water when the introductory interest rate periods expire. These risky types of mortgages include Option Mortgage Loans. If you use an option adjustable rate mortgage to purchase a home you could not afford with a traditional mortgage loan you place your home and your financial well-being at risk. Eventually, you have to pay both the principal balance and the interest due; your monthly mortgage payment could come as a surprise when this happens. Rising mortgage interest rates have taken away much of the luster from adjustable interest rate mortgages. Many homeowners with ARMs are now refinancing mortgage loans to lower their risk of skyrocketing monthly payments. Hybrid adjustable interest rate mortgage loans are a popular choice if you don’t plan on staying in your home very long. For more information sign up for our free guide: Five Things You Need to Know Before Refinancing a Mortgage.

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