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Now Is The Time To Refinance Your Mortgage
The Benefits Of Refinancing Into A Fixed Rate Mortgage When
Interest Rates Are At An All Time Low
By The Mortgage Guy / MortgageLoanRequest.com
Interest rates are at historic lows again
and now is the time to consider refinancing any home loan you may currently
have, and getting into a Fixed
Rate Mortgage. If you currently have a Fixed Rate Mortgage and the
current rates are lower than when you took out the loan, then you should
also consider refinancing. There are numerous loan and interest options
around today, and the terms that are being offered are what the newspaper
headlines are calling historic. No longer are just the traditional fifteen,
twenty and thirty-year amortization plans available at these very low
rates, but now forty-year mortgages are becoming the norm too, and are
endorsed by both Fannie Mae and Freddie Mac.
Last Friday, the Fed announced that the rates for 30-year mortgages took
another dip to an all time 14 month low of 5.56 percent, for 30-year terms,
which is a drop in the rate of last week from 5.62, the ninth such time
in a ten week period. If you are looking for 15-year terms you should
be able to negotiate a loan between 4.21 and 4.26 percent. Everyone is
so astounded and confounded by all of this, even Alan Greenspan, chief
banker at the Fed.
Please Note: The figures quoted here are
nationwide averages (1st week of June 2005) and points have not been
taken into account. When analyzing your specific situation, relative
to this period in time, 30-year mortgages are being commonly assessed
a 0.6 nationwide average fee of 0.6 point and the shorter amortization
schedule for a 15 or five-year mortgage stands at 0.5. Short term Adjustable
Rate Mortgages (ARM) have an average fee of 0.7 point. Both a Mortgage
Refinancing Calculator and a Mortgage
Consolidation & Refinancing Calculator are available to help
you better analyze and understand your own situation. All loan agreements
are not equal and you must fully understand the terms of your particular
loan before you can compare it to one you may be thinking of converting
to.
When Greenspan recently addressed Congress, he expressed concerns
relative to the newly acquired taste for Hybrid and Interest
Only Mortgages that has swept the country. While referring to the
many options that Hybrid Adjustable
Rate Mortgages now offer, he had this to say: "To the extent that
some households may be employing these instruments to purchase a home
that would otherwise be unaffordable, their use is beginning to add to
the pressures in the marketplace."
The chief economist over at Freddie Mack, Frank Nothaft
gives us an understanding of how national employment figures also tie
into this phenomenon of very low rates, "The May employment report
came in at less than half of what was expected last month, which pushed
bond yields - and mortgage rates - down further." Having said that,
he then revised his previous speculation of where mortgage rates will
be at the end of the year. 30-year mortgages will most likely finalize
around the 5.9 % to 6.2 % range. He had earlier felt that figure would
have been in the ball park of 6.5 percent.
MortgageLoanRequest.com has been monitoring very closely
these past few months these interest rate trends and how the Fed, property
investors and banking and real estate professionals have been responding
to it all. Most analysts conclude that home owners should consider refinancing
at this point in time, and we also encourage people to do the same. There
could be no better time to do this than right now. The only real questions
should be: what is my current loan arrangement, what are my current budgetary
constraints, and what kind of loan should I refinance into?
If you are currently paying higher rates and are able to
get out of your mortgage without suffering a penalty, then it would make
sense to refinance while rates are rock bottom. Lower interest rate payments
over a 15, 20 or 30 year period add up to a savings of tens of thousands
of dollars. Dollars that we are sure anyone could use for other expenses
in their life. Even possibly a higher yielding investment.
The real benefit of refinancing to a Fixed Rate Mortgage
however will be realized when interest rates start to escalate back to
their previous higher levels. To guard against this increase in rates,
a Fixed Rate Mortgage offers solid, unquestionable security, while an
ARM or an Interest Only mortgage offers little or no security against
the ravages of escalating interest rates and a stumbling economy. Currently
hybrids are all the rage for people with little or no money down for enabling
a first time home purchase. However if you already own your home, we feel
that the risks of a hybrid could far outweigh the rewards.
A fixed rate mortgage may not afford you cash back or a
line of credit similar to a HELOC
(Home Equity Line of Credit), but it affords you a level of stability
and a fixed monthly budget outlay that you can plan and depend on. After
such a wild time at the mortgage rate races, a bit of conservative refinancing
is what a lot of people may need. When interest rates begin to shoot back
upwards, mortgage loans will be again out of the reach of many.
Some savvy economists surmise that after the dot com crises
of the nineties, the Fed purposely allowed mortgage interest rates to
fall in order to keep the then booming economy in overdrive. The idea
behind their fiscal strategy is based upon the fact that the construction
of new homes has always been a good economic stimulus and a bolster for
job growth. With a down-turn in these sectors, and the many peripheral
ones as well, Americans will start to lose their jobs through cuts in
production. Consequently, their spending power will then be diminished
and many will lose their homes to foreclosure. The first to suffer will
be the home owners who got into hybrid ARMs and assumed those high risks.
Many have already done so because they were either cash poor at the time
and unable to make the higher payments, or were wanting to "purchase-up"
and get more house than they would have traditionally been able to afford.
Their lust for home ownership, lenders competing for their business and
the hollow promises of profits from the investment, has clouded their
ability to make sensible judgments about their financial future.
MortgageLoanRequest.com firmly believes that anyone who
is comfortably sitting in a home that they refinanced using a FRM, will
be secure in knowing that the decision that they made, back in the summer
of 2005, was a financially prudent one. They will also know that if the
rates are stimulated in such a way as to begin dropping again, and they
want or need to access the equity in their home trough some form of a
HELOC, they can always do so.
Please be aware, refinancing and home borrowing are situations that require
a good understanding of your present mortgate situtation as well as the
terms of the loan you are seeking to convert to. Anyone who is not sure
of their level of understanding regarding these matters should consult
with a mortgage lending professional before making any financial decision
of this magnitude.
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