How Do We Know When the
Market is Right for Mortgage Refinancing?
By Jon Dital
Refinancing your mortgage or your loan is a tricky issue. On one hand, there are market periods when credit allocation is wide and interest rate are down - thus refinancing is very appealing. On the other hand, Refinancing is very personal and its worthiness differs from mortgage to mortgage and from loaner to loaner.
In this article we will examine the general market conditions that makes home or mortgage refinancing a viable option.
But, again - a mortgage is a very personal thing, and your credit score, property value and original mortgage conditions are very important when considering refinance. Check your credit score, check your financial condition and use
refinance mortgage calculators to see if refinancing is objectively right for you.
First, a drop in interest rates is the first market condition that favors remortgaging. The rule-of-thumb says that when the difference between your mortgage rate and current mortgages rates is 2% and more - refinancing will be worth considering.
When market rates are low, just like today, refinancing your mortgage will result in a lower monthly payment, thus making your "break even point" closer (This is how soon will we cover the refinancing costs).
Such market conditions may be very rewarding for loaners that originally took a subprime loan and improved their credit score throughout the year. A subprime loan that was taken at 6%-8% can todaybe refinanced at an annual 2.5%-3% prime rates- which will result in hefty money saving throughout the rest of the mortgage.
Moreover, there are times when the government wants to promote growth and therefore gives banks and lenders preferable terms if they release credit. These market conditions are what we see today: not only does the FED lowered the interest rate to 0.25%-0.5%, but it is supporting banks and financial institutes that give bigger credit allocations. These times are best to take advantage of and refinance your mortgage. Also, you may consider even enlarging the mortgage (if you are capable to pay higher monthly payments) in order to improve your property and extend its value.
For conclusion, times when government and the central bank try to promote growth by allocating cresit and keeping a low interest rate are exactly the times you should wait for before refinancing or remortgaging.
In these times the bank will be more generous with credit and the interest rate slump will allow you to benefit more from the refinance process. If you improved your credit score and payment abilities, than personally you may even benefit more.
Be sure to check objective databases such as Mortgage Refinancing for more data regarding the right time to refinance. And remember - this economical decision should not be taken lightly, but only if you can see the refinancing process as such that will allow you to pay less for your home throughout the years.
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