Things never stay the same for too long, and there is nowhere where this is truer than in the case of home loan refinance. Changes in your circumstances as well as the state of the financial markets can make a major impact on your overall mortgage costs.
As we all know, interest rates fluctuate as time goes by and when they go lower it may be time to consider a refinancing of your already existing mortgage. Some questions you should ask yourself are how long you plan to stay in your current home, how much you might save by renegotiating your present interest rate, and what sort of costs are involved in a renegotiation.
For example, if you currently have an Adjustable Rate Mortgage and you think mortgage rates may be on the rise, then you may want to switch to a Fixed-Rate Mortgage. Doing that may save you hundreds of dollars a year in interest. In such a case, switching to a Fixed-Rate Mortgage may allow you to lock your rate in at the current low level. Since mortgage rates can fluctuate greatly in a fairly short period of time, by negotiating a mortgage refinance you may be able to adjust your loan to a fixed-rate and avoid the very real possibility of your interest rate climbing.
On the other hand, if you are only planning on being in your home for a few more years, it may not be worth it to go through with Mortgage Refinancing. Usually, if you expect to remain in your home for more than seven years, such a move could result in significant cost-saving.
Or let’s say you are planning to remain in your home for fewer than nine years. In that case you may wish to refinance your mortgage from a high-interest 30-year Fixed Rate Mortgage to an Adjustable Rate Mortgage with a lower interest rate and corresponding lower monthly payments. It all depends on the state of your finances, the type of mortgage you already have, and the rate you can negotiate with your lending institution.
How Much Difference Can It Make? – An interest rate adjustment of 1/2 or 3/4 of a percentage point may not seem very important, but with today’s large mortgages and relatively low interest rates, a shift of 1/2 or 3/4 percent can make a huge difference. In fact, reducing your interest rate by as little as 1/2 to 3/4 of a percent can result in a sizable savings.
This is one of those instances where paying attention to details is important. For example, if you were able to negotiate a lower interest rate by just 1/2 a percentage point you could save more than $30,000 over the course of a 30 year $300,000 mortgage.
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