This Is The Best Time to Refinance

With the current state of the economy and the housing market going all over the place, you may wonder if it is a good idea to refinance now.  There is not one answer that will work for everyone, but if you consider a few things about how mortgage refinancing works, you will be able to decide if a mortgage refinance is right for you now.

Because interest rates for home mortgages are at historic lows, mortgage refinancing can lower your current monthly payment quite a bit.  Lowering the payment is the prime reason for most people to think about refinancing.   Because of this, many people are taking advantage of the rates to lower their payments.  However, if you have a pretty low rate already, you need to make sure that the new rate is at least 1/2 percent lower than the one you currently have or the closing costs you may  have to pay will negate the benefit of the lower rate.

Although interest rates are at historic lows, this is not the only factor to consider.  In many areas of the country, home prices and values have plummeted.  The only way to determine what your home is worth right now is to get an appraisal.  In fact, that will be one of the requirements for a mortgage refinance.  Once your home is appraised you will be able to tell if you have enough equity in the home to make it worth the refinancing.

Generally, you can’t refinance more than 90% of the value of the home, and if you want to refinance more than 80%, you may have to pay a monthly PMI or mortgage insurance fee.  If your home value has dropped, you may not have enough equity to make it worth refinancing.

If your credit scores have dropped, the only type of mortgage refinance you may be eligible for is a bad credit mortgage.  The interest rate on this will be higher than for a regular refinance, but depending on your original interest rate and the length of the new term, it may still lower your payments to a more manageable level.

Because interest rates are so low, now is actually a pretty good time for people who are looking into bad credit mortgage loans and refinancing options.  Remember that lots of documentation will be required with every kind of home loan you are looking at, but with low interest rates, it might be very worth the time and effort to work with a loan officer on that mortgage refinancing you have been thinking about.