Interest Rates Are Down: Should You Refinance?

You hear it everywhere! The time is right! The federal government is trying to help out the average joe by lowering interest rates. Now is the perfect time to jump on this opportunity and save on your home mortgage! Hold just for a moment though because the decision is not as simple as it appears to be.

Overall, yes, it is a great time to look into refinancing, but there are some specifics to consider first. One of the most important influences upon your decision about whether to refinance or not is your current percentage rate. This can be found on your original loan paper, and usually your monthly mortgage statement as well. If nothing else, you can call your lender in order to have concrete number to base your decision on. Another important number to have in hand is how much you owe.

Okay now it is time to crunch some numbers. When deciding who to go with there are quite a few things you need to consider and a few documents you need have close at hand. The some basic documents will need when refinancing are W-2, three bank statement, and a months worth of pay stubs. There are a number of different options when refinancing your home. It is difficult decision to make when there are so many different terms and rates thrown at you. The three basic options when you refinance your house is your current lender, another bank, or an internet site.

The first option you have to consider is going with a bank. There are a number of benefits going with a bank.. The first big positive about going with a bank is they are not on commission. Therefore they are much more likely to have an unbiased view as to whether you should refinance or not.

Another option to a refinance a loan is to go with an internet based companies(i.e. lending tree). The positives about these companies is they shop around for a bank with the best rate for you. While this may seem like an easy way to get a good rate, there is more to the story. One of the downsides to this companies is you decide to go with these companies is their agents are on commission. While there may be many good agents throughout these companies there still is no guarantee they are not influenced by the fact they would get a commission. This is an important consideration because this is a big investment on your part. Another downside to these companies is the cost. This is the major catch with these companies. You are not only paying the same fees you would if you went to a bank but you are also paying a commission to this company. This basically adds a middle man to the equation.

Now that you have decided which route to go with you need to get an idea of whether it would be financially beneficial to refinance loan or not. Generally a good rule of thumb is to talk to your lender first and find out their percentage rate. If there is less than a percent difference between the percentage you are currently at and theirs, it generally it won’t pay to refinance. This is also where you need to take into account just what you owe. If you only owe $60,000 on your home, a 1% percentage it will save you around $40 a month. In the end this will not be worth it because it will cost around $5,000 to get the mortgage. Yet if you owe $400,000 on your home and you are able to drop it a percentage point that will save you around $300-400 a month which will pay off after a few years.

After you have called your lender and found out how much their percentage rate is this is the time when a little legwork can pay off. You need to call a few other banks in order to compare what each bank will offer you. You will then have all the information to make your decision.

Overall this is a great time to get a good percentage rate locked in! Do your homework and see if it would be in your best interest to take advantage of the lowered interest rates.

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