Current refinance rates hit new lows. Today's mortgage interest rate is 3.25% for 30 years fixed rate. Mortgage rates are the lowest in over 50 years according to Freddie
The process of paying off an existing loan, with the
proceeds from a new loan is known as a refinance. Borrowers often seek
to secure a
lower interest rate or to lower a monthly payment. The most common type
is of refinance is a rate and term. In addition to lowering rates and/or
associated payment, a mortgage refinance often reduces the term of a
allows a borrower to switch between a variable and fixed rate. A
consists of the same size loan, using the same property as collateral.
to determine if a refinance is beneficial, the savings in interest must
compared to the fees associated with the refinance process. An example
refinance fee is a prepayment fee.
There are many reasons to refinance. However, here are the 3 most common reasons I've seen. If you find yourself in any of these categories, start looking into the various refinance programs available to you.
Lower your monthly payments
Probably the most common reason for refinancing is to lower your monthly payments in order to ensure that each payment can be made.
There are various ways to lower your payments. One way to do so would be to increase your loan term in order to pay less for an extended period of time.
If you have an fixed rate mortgage and feel that you can't afford your current payments on the short term, but believe you will be able to deal with an increased rate later on, you might want to consider switching to an ARM because its rates will be fixed at a lower rate for a short period of time and then adjust later on when you know you can afford it. Conversely, if you have an ARM it would make sense to switch to an fixed rate mortgage with lower rates.
Decrease loan term
Many people choose to refinance primarily for that reason of decreasing the loan term while slightly increasing monthly payments. In the long term this probably will save them a lot of money thanks to a lower interest rate. They will also finish paying off the loan a lot sooner.
Many times there are other important debts people have to pay off or will need to pay off in the near future. Refinancing for more than you currently owe will allow you to receive a large amount of money to pay for these investments, whether it be for college, home improvement, or buying a car. Many times people can do so while getting a lower interest rate.
Current refinance rates hit new lows!