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Many homeowners who have not yet taken advantage of low mortgage interest rates are wondering just how low rates will go. The fact is rates have plummeted to lows not projected by the shrewdest economic experts two years ago.
In January 2008 the fed made history, at least within the past decade taking a big bite, 75 Bps off the current rate. The purpose was to stave off a failing economy and beat recession.
Once the cut was implemented stocks surged and homeowners took the Internet by storm asking the refinance wave question of the century. "Is now a good time to refinance?" A representative at RefinanceLoanRates said "It looks like a new wave is about to take hold as homeowners seeking to offset a price inflation consider a cut down on mortgage interest rate fees." This was particularly beneficial for those struggling with
ARM's.The New York Times reported the following; "The reduction in the federal funds rate from 4.25 percent down to 3.5 percent marked the biggest reduction in this target rate for overnight loans on records going back to 1990."
In addition to cutting the funds rate, the fed said it was reducing its discount rate, the interest it charges to make direct loans to banks, by a similar three-quarters of a percentage point, pushing this rate down to 4 percent. Homeowners were prepared to seize what could be a once in a lifetime opportunity to slash home mortgage interest rates and save thousands in mortgage interest costs. Others who waited were strongly advised to seize the day before a series of rate hikes commences.
But many fed cuts took place since then. Note the following fed rate cut history recently published by RefinanceLoanRates.
Jan 22, 2008 Rates were cut to 3.50%
Jan 30, 2008 Rates were cut to 3.00%
Mar 16, 2008 Rates were cut to 3.00%
Mar 18, 2008 Rates were cut to 2.25%
Apr 30, 2008 Rates were cut to 2.00%
That said rates are at an all time low. Who benefit from the recent Fed rate cuts? The historic January 2008 Fed rate cut produced telling headlines.
"Fed Rate Cut to Boost Auto Sales - Chrysler CEO"
"Asian Markets Ease Higher After Rate Cut"
"Fed’s Action Stems Sell-Off in World Markets"
"Gold Rallies on Fed Rate Cut"
How homeowners benefit from reduced Fed rates.
ARMs scheduled to reset soon typically adjust to market rates after an introductory term. Those short-term rates track the Fed's key interest rate and already have fallen over the past month in anticipation of a rate cut making mortgages more affordable, reports Mortgage Loan Search at
http://refinanceloanrates.fimark.net.
Is Now A Good Time To Refinance?
There are 3 primary reasons people refinancing their mortgage loan:
1. To take advantage of lower interest rate
2. To convert some of the equity in their homes into cash.
3. Convert from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage.
If you're not planning to move any time soon, have fair to good credit and your seeking an ARM now may be a good time to refinance your home loan.
The refinancing option can be a good idea if the interest rate on your mortgage is higher than current prevailing rates especially if your mortgage carries an adjustable interest rate that has been trending up. Also if you’re new mortgage loan is 80 percent or less than the value of your home you will have No PMI (Private Mortgage insurance) to pay.
Still some homeowners do well to wait to refinance. The issue is not how low will rates go but rather how much loan and associated interest have you paid? Why not wait until the new payment is at least 8% less than the current payment.
Example: If you have a $1000 payment wait until your payments drop to at least $920 or less. This saves you one payment per year. Another goal is to "break even" with closing costs before refinancing your home.
If you have a 30-year fixed and are in year 4 or 5, of your term consider refinancing to another 30 year fixed at a lower payment. You will now be paying for your house in 34-35 years, increasing your effective interest rates. You can take the savings, and either invest it into a mortgage pay down fund, or pay down the new mortgage directly until the repayment period matches the original mortgage.
What if you have been paying off a home mortgage loan for 10 years or more? You will get better rates on 15 year fixed than 30 year fixed. In this case consider shortening the repayment period and owning your home sooner than originally planned.
There are many advantages to refinancing your home loan.
1. Lower interest rates to reduce your monthly mortgage payments
2. Build equity in your home faster by refinancing to a shorter-term mortgage.
You may want to start your search for a new mortgage with the lender you used the first time.
Usually your current lender will give you a better deal to keep you as a customer. Even so its best to mention offers you've
received from other lenders. Your current lender will likely try to meet or beat these offers in order to keep your business.
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