New Interest Rates on Mortgage Loans
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by: marciafreeman
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In an effort to breathe life back into the struggling real estate market, the federal government made a decision at the end of November to purchase $500B of mortgage backed securities. Since then, interest rates for mortgage loans have been shrinking. Freddie Mac starting tracking interest rates almost 30 years ago and the rates today are lower than they have ever been during that period. Falling rates are a pleasant surprise in the struggling economy, especially for potential home buyers that were shut out by inflated values during the real estate boom. Many of those consumers have decided to take advantage of the low rates for mortgage loans to purchase a home. And many current homeowners are refinancing original mortgage loans under the new interest rates. Although the interest rates are enticing, lending institutions now have much tighter lending standards. Unfortunately, fewer people are eligible for the lowest rates due to higher credit score and down payment requirements. Those particularly affected are homeowners whose home values have decreased significantly since they purchased their properties. The drop in values have left them holding less equity in their homes. Consumers who are considering refinancing their mortgage loans should review their credit reports and credit scores, as well as the amount of equity in their current mortgage loans.
If you are considering refinancing, begin your research by finding out what rates and terms for mortgage loans are available to you. Next, do the math to determine if a refinance is the right thing for your financial plan and budget. The most common reason for refinancing is to bring down the payments on mortgage loans. To determine how much you would save, subtract the anticipated new monthly payment from the loan payment you make now. Then add up all the costs of the refinancing. Just like when you obtained your original mortgage, you will have bank fees, documentation and title costs, attorney fees and appraisal costs. The next step is to figure out your "break even point," or when you will actually start saving each month. You do this by dividing your total estimated cost for the refinancing by your estimated monthly savings. This will give you a rough idea of when you will start saving. If you expect to sell the house before you break even, refinancing might not be the best financial move. If you plan to own the house past that break even point, then consider refinancing. If your savings outweighs the costs over the time you expect to own the house, then refinancing now via the low rate mortgage loans could be a smart move.
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