How to Take Advantage of Lower Mortgage Rates
Lower interest rates sound like good news, but how do you translate that good news into a good deal for you? Not sure? Then, read on to discover five ways to take advantage of the lower mortgage rates.
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Things You'll Need
- Your current mortgage information (if applicable)
- The latest mortgage rate information
- A calculator
Instructions
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Purchase a home while the rates are low, and you'll be able to afford more home for your money or to enjoy a smaller mortgage payment.
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Refinance an adjustable rate mortgage to a fixed rate mortgage. When the interest rates are low, it makes sense to lock in a fixed rate.
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Refinance a fixed rate mortgage to a lower interest rate. Often a one percent drop in interest makes it worth refinancing.
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Refinance a fixed rate mortgage to a shorter loan term. When the interest rates fall one and a half percent below your current rate, you can usually switch from a 30-year mortgage to a 15-year loan for at or near the same monthly payment.
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Refinance your mortgage and second mortgage into one low payment. To decide if this makes sense for you, add the interest rate from your first and second mortgage together, and divide by two. If the resulting figure is one percent more than the current mortgage rate, it may make sense to merge the two loans together into a new loan with a lower rate.
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Tips & Warnings
Check with several mortgage lenders before making a decision. Rates and loan costs can vary widely from lender to lender.
When you find a loan offer that interests you, request a good faith estimate. This document will show you the true cost of the loan, including any closing costs.
Remember to weigh the cost of refinancing a loan against the savings benefit of the new loan.
Avoid any lender that wants to tack a prepayment penalty onto your loan. This mean you'll be charged a hefty penalty (usually a percentage of the full loan amount) if you decide to pay off (or refinance) your loan before the term of the loan expires.
