If you have been considering a refinance of your house, now may be the time to act. If you have good credit and a high interest rate on your mortgage, then the mortgage crisis has, ironically, created an opportunity for you. You can benefit exceptionally well from a refinance if you bought property during the past couple of decades, when interest rates periodically soared.
Mortgage interest rates are low because the Fed has slashed federal interest rates in an attempt to stimulate the economy. Although Federal rates are not tied directly to mortgage rates, lenders tend to adjust mortgage rates to follow the same upward or downward trends.
When you consider whether a refinance is right for you, here are a few questions to take into account:
* Will any savings from a lower interest rate be offset, or surpassed, by the charges from refinancing fees? A refinance may bring with it a number of fees. If your interest rate is already fairly low, you may find that the money you save on interest payments is eaten up by closing charges.
* In the same vein, does the new mortgage you are considering offer a longer term that will add extra interest payments to your final bill? If so, the added interest payments may offset any savings from the refinance, even if the interest rate itself is lower. Often, when people refinance, the bank offers them a mortgage with a longer term as well as lower interest rates, leading to attractively low monthly payments. However, because the interest has longer to accrue, the lifetime total of the loan may add up to even more money than the previous loan. A loan calculator can help you work out whether an offered loan really offers you savings. If the total comes out to more than the total of your previous loan, either pay more than the minimum each month to informally shorten the term of the loan, or do not refinance.
* Avoid variable rate mortgages when you refinance. Variable rate mortgages generally offer lower monthly payments than fixed rate mortgages, but you are likely to lose the benefits of the low interest rate when the economy booms and Federal interest rates rise again.
* Do not wait for rates to drop lower before you refinance! Interest rates are reaching record lows already. If you wait to refinance, you may find yourself caught in a tide of rising rates. If rates do start rising, do not wait even longer in the hope that they will drop again. Grab a relatively low rate while you can. Refinance and lock in a lower rate as soon as possible, getting an interest rate that saves you a good amount of money, rather than sitting on an expensive mortgage in the hopes that you will be able to save even more money.
Even a weak economy has its bright side. If you weigh your options carefully, you can take advantage of the current economic situation, and refinance your house at considerable savings to you.

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