Does Refinancing Make Sense Right Now?
While you may have heard of the recent law called “Making Home Affordable” that requires banks and other lenders to lower the mortgage interest rate for those in financial distress, you may not be aware that there are some requirements for the homeowner. Not everyone can qualify for this massive 2% interest rate.
First, your monthly payment must equal 31% or more of your income. For another, your credit must be current and you must not have been behind 30 days or more in the previous year. And finally, you have to sign a statement of financial distress. Freddie Mac or Fannie Mae mortgages are also eligible.
However, if these conditions do not apply, you are at the mercy of the lender’s prevailing interest rate. Refinancing doesn’t always make sense. The best way to tell if a mortgage refinancing would be a wise decision for you is to use an online calculator.
There are many websites that offer this nifty little tool. You just insert the remaining balance of your housing loan, add your current interest rate, the new interest rate and the duration of the loan and it will come back with the monthly payment figure.
But you also need to know if you have to pay any extra fees or points for this figure to be accurate. Even if you don’t have this information yet, it will give you a good idea of whether the current refinancing mortgage interest rate you’ve found will reduce your monthly payment enough to be considered valuable.
Waiting and Watching the Best Mortgage Refinancing Rate
It will take some time to get the best rate for your home refinancing. While interest rates have tended to hold steady over the past few months, there’s no guarantee that this will continue. The best thing you can do is to monitor the overnight changes every day and be ready to take action when it reaches your preferred level.
Mortgage interest rates depend on a number of factors. One of them is supply and demand. If demand is high, the rate goes up and vice versa. A cut in the Federal Reserve’s prime rate doesn’t necessarily mean mortgage rates will be cut as well.
In fact, the opposite may be true. A lower prime rate is used to stimulate the economy by encouraging people to borrow at these cheaper rates. Sellers, in turn, will increase the prices of their products. When the resulting inflation cheapens the value of the mortgage bonds, the lender has to make up for it somewhere, usually at the interest rate.
For homeowners who don’t have the time or patience to keep a close eye on refinancing mortgage interest rates, their best bet is to hire a company that will do it for them. There are many professionals who will work hard to find the best interest rate and will notify you as soon as interest falls on your threshold.