Finding the Lowest Refinance Mortgage Interest Rate | Mortgage

Finding the Lowest Refinance Mortgage Interest Rate

by BradleyMarmer

More and more Americans are turning to their banks in order to get a better refinance mortgage interest rate and reduce their monthly payments. As the economy worsens before it can get better, this seems like a sensible thing to do. But before you pick up that phone and call your mortgage holder to begin a refinance, here are a few things you need to know about getting the best rate.

Is a Refinance Right Now Worthwhile?

A lot of Americans are excited since President Obama passed his "Making Home Affordable" plan as part of the economic stimulus package. The requirement that lending institutions offer a 2% interest rate to those hit hardest by the failing economy and a loss of income is indeed something to get excited about. But do you qualify for it?

The fact is that you must be eligible for this great low rate. Your mortgage payments must be current and you cannot have fallen past due for more than 30 days in any month from the previous twelve. The payment for your mortgage needs to be 31% of your monthly income or higher, and you need to prove your financial hardship. If your mortgage was written by either Freddie Mac or Fannie Mae, you are also eligible for refinancing at the 2% rate.

If none of the above applies to you, then you must refinance at the prevailing rate offered by the lender. Sometimes the difference is not great enough to make good financial sense. Consider finding an online mortgage payment calculator as a way to help you decide.

Try putting your figures into an online mortgage payment calculator and this will give you a better idea if refinancing is worthwhile at the present time. You will need to know your current loan balance and interest rate, as well as the rate of your new mortgage. You will also have to input the term of both your current and future loans.

Bear in mind that this figure will not be totally accurate unless you know the amount of any fees or points that must be paid to refinance. Even without these figures, however, the online calculator will give you a good indication if refinancing is even a viable option in your circumstances.

Plan to Find the Lowest Mortgage Refinance Interest Rate

If you are determined to wait until the best interest rate is being offered by your lender, you will have to exhibit some patience and keep a daily watch on overnight mortgage rate changes. The rate has remained stable in recent months, but that is bound to change at any time. You must be prepared to start the paperwork when the rate hits your target low.

Some people are under the misconception that mortgage refinance interest rates follow the prime. This is not true. As a matter of fact, mortgage rates are bound to go up when the prime is cut. Supply and demand also play a factor in the fluctuation of the rates.

In fact, the reverse could be true. A lower prime rate is used to stimulate the economy by inducing people to borrow at these cheaper rates. Sellers will, in turn, increase the prices of their products. When the resulting inflation cheapens the value of mortgage bonds, then the lender has to make up for it somewhere, usually in the interest rate.

There is a lot to be aware of when seeking the lowest possible refinance mortgage interest rate. Most homeowners do not have the time or skill to do so. You may prefer to work with a reputable company that can find the best loan product for you, and let you know as soon as the interest rate becomes low enough to make refinancing worthwhile.

DISCLAIMER: This article is provided as information only and is not to be taken as financial advice.

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