As the American economy continues its downward spiral, many homeowners are seeking to reduce their monthly expenses by looking for a lower refinance mortgage interest rate. For anyone struggling to make ends meet, this could be a viable option. You may want to consider the following factors, however, before you begin the process of refinancing your home.
Does it Make Sense to Refinance Right Now?
Although you may have heard of recent legislation entitled "Making Home Affordable" that requires banks and other lenders to reduce the mortgage interest rate for those suffering financially, you may not be aware that there are requirements for the homeowner. Not everyone qualifies for that great 2% interest rate.
There are some requirements to qualify for this plan. These include a mortgage payment that is at least 31% of your monthly income, your loan status being current and never more than 30 days past due anytime in the prior twelve months, and the ability to submit a financial hardship statement. If you financed your home with Fannie Mae or Freddie Mac, you are also eligible for Making Home Affordable.
However, if these conditions do not apply, then you are the mercy of your lender's prevailing interest rate. It does not always make sense to refinance. The best way to figure out if a mortgage refinance will be a smart decision for you is to use an online calculator.
Try putting your figures into an online mortgage payment calculator and this will give you a better idea if refinancing is worthwhile at the present time. You will need to know your current loan balance and interest rate, as well as the rate of your new mortgage. You will also have to input the term of both your current and future loans.
Remember that the payment amount returned by these calculators is just an estimate. Unless you know the points and any additional fees you will have to pay to refinance, it is merely going to give you the principal and interest amount.
Plan to Find the Lowest Mortgage Refinance Interest Rate
If you are determined to wait until the best interest rate is being offered by your lender, you will have to exhibit some patience and keep a daily watch on overnight mortgage rate changes. The rate has remained stable in recent months, but that is bound to change at any time. You must be prepared to start the paperwork when the rate hits your target low.
Prevailing mortgage interest rates are based on a number of factors. One of them is supply and demand. If demand is high, the rate will go up, and vice versa. A cut in the Federal Reserve's prime rate will not necessarily mean that mortgage rates will also be cut.
In fact, the reverse could be true. A lower prime rate is used to stimulate the economy by inducing people to borrow at these cheaper rates. Sellers will, in turn, increase the prices of their products. When the resulting inflation cheapens the value of mortgage bonds, then the lender has to make up for it somewhere, usually in the interest rate.
There is a lot to be aware of when seeking the lowest possible refinance mortgage interest rate. Most homeowners do not have the time or skill to do so. You may prefer to work with a reputable company that can find the best loan product for you, and let you know as soon as the interest rate becomes low enough to make refinancing worthwhile.
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