Apprehension of a double dip recession and a potentially worsening economic crisis have had a major impact on the mortgage service market in the US. The rates have fallen to a low never-seen-before in the last half century. These fears have led to a panic in the market among buyers. Even long term mortgages such as a thirty-year mortgage is at a rate of little over 4%. This is also a new low. In as much as six decades at that. What the experts are suggesting at this stage of the economy is a refinancing solution. Especially for those people who are qualified homeowners.
The main advantage of making such a move as suggested by experts is sizeable savings through exploitation of low rates of interest. While this may not be true in case of all house owners, all of them should most definitely give it some time and consideration. This could turn out to be great time for refinancing. Keep in mind though that the lending boom in the country is a thing of the past. That was a time when virtually any person could go to a lender and walk out with a loan. The rules of the game have changed now and banking policies regarding lending money have been made more tight and efficient.
Inspite of that, if a homeowner can can show proof of a 740 credit score and an equity of 20% in the home, then that would be enough for him to qualify for getting these low rates for refinancing. If you can get to the afore stated status or anywhere close and are looking for refinancing, then there are some things to bear in mind.
- Don’t make a decision until and unless you have been around in the market. Mortgage rates are offered by a number of lenders and these rates have a wide variation. So, snoop around anywhere and everywhere and look for all options and rates on offer. Even a 1% difference is significant. Just to paint a rough picture, that little difference can mean a difference of as much as $140 each month or $250,000 on the entire loan. You would not want to miss out on such a big opportunity.
- Break Even Point: Those people who already enjoy low rates on their mortgage should be careful while considering refinancing. The whole process can cost thousands in fees, service charges, and closing costs. If there is a significant difference using the new rates after deducting these costs, then a refinancing makes sense. Otherwise, you are going through a lot for a little or nominal gain.
- Closing Costs: Each refinancing scheme has a closing cost. It does not matter if the lenders promote it as one with no closing costs. They will just use a different name to charge you for the same thing.
- Lock Rate: When you get a good rate and close the refinance deal, make sure to get a confirmation from your bank. A confirmation means the rate at which you have closed the deal is locked throughout the duration of the refinancing.