You And Your Mortgage: When To Refinance, When To Hold Tight

As interest rates drop, home owners and investors alike pay attention. As a home owner, you know your monthly mortgage payment, you know your interest rate, and you remember, all too well, the closing costs and miscellaneous expenses involved with securing your mortgage. Yet, when surrounded by market conditions that lead to declining interest rates, we must all weigh the benefits with the costs and how those decreasing interest rates affect us.

The sluggish economic conditions that may surround declining interest rates are of concern, in that job security or portfolio investment returns may be less certain. Yet, when refinancing mortgages, if the upfront costs of mortgage refinance do not out way the midterm benefits of money saved each month due to lower mortgage payments, then by all means read further and explore if a mortgage refinance will increase your cash flow by reducing your mortgage payments and freeing up more disposable income.

In general it is the policy of most financial institutions to recommend that further mortgage refinancing may be worthwhile when interest rates fall more than 2 percent below your current mortgage. This is hotly disputed, however, and most now agree that while it could have happened in previous eras, it does not now. In present times the borrower has a wide range of choices when it comes to refinancing his mortgage. Those who now occupy the centre of the income range are becoming increasingly knowledgeable in money matters and many own stocks and shares, a fact not true for previous generations. Of course the potential rewards of such pursuits are accompanied by great risk and many fall into credit card debt are crippled by interest rates.

For home loan refinancing, you should consider the following critical factors:
1. Current Market Interest Rate
2. Current Mortgage Interest Rate
3. # of Years Left Remaining on Your Existing Mortgage
4. # of Years That You Plan to Keep the New Mortgage
5. Cost Comparisons of Lowered Closing Costs From Competing Banks
6. Existence of a Prepayment Penalty with Current Policy

It is important to consider very carefully the basic concepts of home mortgage refinance. You may even want to make notes for yourself to ensure you have a clear understanding of the effect refinancing will have on your mortgage. Will the monthly savings produce any extra cash, for example? When you have reached this point, it would also be useful to run a few hypothetical financial computations with an online financial or mortgage calculator. Speaking about refinancing with a loan officer would be beneficial, as well.

NB: Unusually severe currency value fluctuations can have a positive or negative effect on the outcome of your calculations. If this is known to be occurring or expected to occur, you should allow for this factor when calculating profit or loss from your mortgage refinance.

A drop in interest rates will attract the attention of both investors and home owners. Those with mortgages understand all too well the relationship between interest rates and monthly payments. As rates fall, home owners will be prompted to evaluate the costs of refinancing versus the benefits over time.

Ron Finkelstein is NOT a Real Estate Attorney, Accountant or Mortgage Broker. He is merely a small business owner who has paid a lot of money over the years to learn a whole lot about Should I Refinance My Mortgage?, Interest Only Home Loans. Distributed by Free Reprint Articles Directory

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