With Low Mortgage Rates, Why Now Is A Great Time For A Refinance Home Loan | Mortgage

With Low Mortgage Rates, Why Now Is A Great Time For A Refinance Home Loan

With mortgage rates falling to all time lows, several people are wondering if refinancing their mortgage is a good idea. Obviously, there are many reasons to consider a home refinance, especially with home loan rates so low. A few reasons to consider a home refinance are lower monthly payment, reduce interest rate, get extra cash, change mortgage term and go from an adjustable rate loan to a fixed rate mortgage loan.

by DavidWhite

With home mortgage rates dropping to all time lows, several people are wondering if refinancing their mortgage is a good idea. Obviously, there are several reasons to consider a home refinance, especially with loan rates so low. Some of the reasons to consider a home refinance are lower monthly payment, reduce interest rate, pull out extra cash, change loan term and go from an adjustable rate loan to a fixed rate loan.

Loan Rates At All Time Lows

The current market has caused mortgage loan rates to fall to historic lows making this a outstanding time to think about a home refinance. As long as there is a benefit to the new home loan, now is the best time to refinance your loan. There are several opportunities to save thousands of dollars in today's loan rate environment and mortgage rates will not stay at these levels forever.

Time to refinance and save money has never been better, but remember, it is very important that you have a reason to refinance along with a benefit for the new mortgage home loan. Here are some of the benefits to refinancing a mortgage loan.

Lower Monthly Loan Payment

When considering refinancing your house to reduce your monthly payment, you need to take into consideration how much your payment will reduce by. Most believe the payment must be lowered by at least 5% in order for the refinance to have a benefit.

Lower Mortgage Loan Rate

Reducing your payment is greatly affected by the interest rate. If you refinance your property and lower the interest rate by at least 1%, then you will see a decrease in payment as well. Most people do not consider refinancing if the rate does not drop by at least 1%. Keep in mind, that even a slight reduction in rate can have a huge impact on the loan.

Cash Out Home Loan Option

Many consumers will pull out cash during a refinance. The cash out home loans allow homeowners to refinance their existing mortgage loan and get extra cash that can go towards debt consolidation, home improvements or anything else the homeowner may want to use the funds for. Keep in mind that cash out home loans have a slightly higher rate and that a homeowner needs to take into consideration the overall financial picture. There are times that a cash out refinance loan could have a higher rate than the current mortgage, but the overall benefit for the home loan could outweigh the higher rate. For example, if a person has a $200,000 mortgage loan at 5% with a payment at $1400 and has over $10,000 in credit card debt paying $500 per month, by refinancing into a new loan at 5.25% with a payment of $1500 will save this person $400 a month.

Change in Loan Term

Some homeowners refinance their home to change the term of the mortgage. The most common change is to go from a 30-year loan to a 15-year loan. The idea is to pay off the note quicker and save more money over the lifetime of the loan. The payment could increase, but the benefit to this type of refinance is paying the house off sooner.

ARM to Fixed Rate Loan

Finally, another reason to consider refinancing is when you are taking an adjustable rate mortgage and refinancing into a fixed rate mortgage. ARM mortgages can have a low rate, but the rate is variable and will change throughout the loan. ARM mortgages are configured for homeowners who plan on only keeping the loan for a short amount of time, usually 5-7 years. By refinancing into a fixed rate loan, you are locking in the rate for the entire loan term.

There are some reasons to not refinance. If you are planning on selling your home in the next year or so, refinancing might not be the best option. You will have to consider the cost of refinancing and what the overall benefit will be.

With rates at all time lows, it is crucial to consult with a mortgage professional and talk about your mortgage options to see if there is a benefit to a refinance home loan.

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

David White specializes in Home Loans. David is a Sr. Mortgage Banker with over twelve years experience with refinance home loans. Also published at With Low Mortgage Rates, Why Now Is A Great Time For A Refinance Home Loan.