People often choose to refinance their mortgage for a variety of different reasons including home repairs, medical bills, paying off school loans, etc. Many mortgage professionals advise only to take on this extra debt if it is absolutely necessary. Before considering this option you may want to think about how long you plan on residing in the home for. It is an awesome time to capitalize on rates while they’re still very low. The Federal Reserve had pulled out of the mortgage backed security market in March and this move may cause interest rates to go up over the next couple of years. They seem to be going up and down daily with the news. Yet, they’re still very attractive for anyone who is lucky enough to qualify for a mortgage.
Obviously, refinancing a home means a new mortgage and new payment schedule for a fifteen up to thirty year period of time. But if the interest rate is favorable, this can save thousands of dollars over time. Many people bought their home when they found it and fell in love with that home. Interest rates at that time may not have been nearly as low as they currently are and this should be a consideration when looking into refinancing. However, at this time about one fourth of all homeowners owe more on their mortgage than their home is currently worth. Over the past couple of years home values have declined a significant amount in many areas of the country, and this has caused a major disruption in the recovery of the housing market. Not only are homeowners stuck with negative equity, but many are choosing to strategically walk away from their home as a business decision. Today, it is believed about one third of foreclosures are due to strategic walk aways for homeowners with negative equity.
If your home has not lost value and you still have some equity then now may be the ideal time to refinance. Qualified individuals should be able to secure a low rate around five percent, maybe lower. Many people believe it is best to go direct to the bank in order to get the best interest rate. This is often true. Banks act as direct lenders and they capped the commissions on their loan officers to make the fees very low in most cases. Mortgage brokers tend to be middleman who will tack on a commission that is often called the origination fee or a rebate by increasing your interest rate that will make you pay more for the loan. However, some mortgage brokers are worth their weight in gold and have made miracles happen for some people. With that said, maybe you can ask around to some friends or colleagues to get a referral are two in order to see who will be the best of it for you.
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