Is this the best time to refinance my mortgage?

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Author: Ron Finkelstein

Article source: http://www.articledeshboard.com/. Used with author's permission.

Home owners and investors pay close attention when the interest rates start to drop. They know the current interest rate they are paying and the monthly mortgage payment accompanied with it. Further, they remember, far too well, the closing costs and other expenses associated with obtaining that mortgage. When market conditions indicate a decline in interest rates, the benefits and costs affiliated with acquiring a new mortgage should be considered and how it will affect the home owner or investor

Interest rate reductions during an economic downturn may point to a loss in investment returns. However, these declines may lead to an increase in disposable income for people with mortgages. Mortgages may be refinanced to free up more of each month's income for other purchases. The caveat is that before refinancing a borrower must make sure that any fees for refinancing don't eat away all the monthly savings of the lower interest rate.

We advise against the standard recommendation that any drop of 2 or more points in the interest rate warrants refinancing a mortgage. Though this has been a long standing consideration, recent changes in options and the borrower mean it is no longer appropriate. Those with debt who have comfortable incomes hold a wider variety of investments and are more pro-active in effectively dealing in multiple monetary tools to maximize their returns. These investors can also relate long and short term needs to different products. The area where these borrowers have not maximized their performance is in the use of ever increasingly expensive credit card usage over recent decades.

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

Now that the critical factors involved in refinancing have been discussed, jot down a few of your own thoughts on the subject. Also take into account, how refinancing could affect your cash flow and if it will generate additional cash flow from your monthly savings plan. Lastly, run a few financial scenarios using an online financial or mortgage calculator. By now, you should have some clear cut notions on how this will affect you. Therefore, you should speak with a loan officer regarding refinancing your mortgage.

Note: If the value of your currency is decreasing at a historically unusual rate as compared to benchmark currencies, consider factoring in the current and future value of money. A calculator may walk you through this or you may ask your financial advisor to go over it with you.

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 Refinancing Mortgage, Interest Only Home Loans. Distributed by Free Reprint Articles Directory