If you are looking to save money on your mortgage, and who isn’t, you’ll need to pay particular attention to the best mortgage rates today and how they are trending for the future. This is critical when looking to refinance your home, and the way to save is to find a lower interest rate and locking it in. Over the life of a 15 or 30 year mortgage, a small reduction in interest rates can greatly reduce how much you pay for your home. Before you refinance, even if you find a much lower rate, there are a few things to consider.
How Long Do Your Plan to Stay in Your Current Home
It makes no sense to refinance if you are not planning to stay in your home much longer. The reason to refinance is to save money down the road. The benefits of a refinance can take years before you begin to recoup the cost of refinancing. To help you decide if it is a good idea to proceed, find the point at which your savings exceed the cost to refinance. If you don’t plan on staying in your home for at least that long, then a refinance is not the right plan for you.
Consider the Term
If you have a 30 year mortgage, you may want to consider a 15 year mortgage when refinancing. This will mean higher mortgage payments each month, but you can find a lower interest rate with a 15 year mortgage. With the interest payments not spread out over as long a time period and with a lower rate, you can save thousands by choosing a 15 year over a 30 year mortgage. Of course, your budget must be able to handle the higher monthly payments.
Fees and Costs Associated with Refinancing a Mortgage
Remember when refinancing there are costs charged by the lender and others involved. These can be considerable, so they will need to be factored into whether or not you should finance, as well as which lender to go through. There may also be appraisal fees, attorney fees and in many instances there are points, which are a percentage of the refinance amount that is charged to you. For instance, if you have a $250,000 refinance amount and have to pay one percent (one point), the cost will be $2,500. This is in addition to other fees such as those mentioned above.
Fixed Versus Variable Mortgage Loans
In some cases, you may want to refinance in order to get out of a variable rate loan. Getting rid of the risk that comes with a variable rate mortgage may be worth the closing costs and fees associated with refinancing. Of course, this still doesn’t mean you shouldn’t seek out the lowest possible mortgage rates. A variable rate is not always less desirable than a fixed rate. It all depends on how rates are trending and the level of risk you are willing to take. If rates rise with a variable rate, your mortgage payments rise with it. If your current mortgage rates are high and rates are dropping, you may want to consider a variable rate mortgage. This will get you out of your current bad rate loan and allow you to benefit from lower rates in the future. Again, there is always risk associated with a variable rate mortgage loan.
Finding the Best Mortgage Rates Today
There are plenty of places to find the best mortgage rates. If you are happy with your lender, start with them first. Find out what they can offer you, then shop around for better rates. You’ll also want to do some research into how rates are trending. If they have hit a low and are beginning to rise, you may need to jump at the chance to refinance. If they are still trending down, waiting a few months for even better mortgage rates can save you a lot of money.