When Considering Refinancing the lowest rates, a borrower must consider that over the period you will hold the mortgage, the total costs net of offsets will be lower on the new mortgage than on the existing one. The costs include a) Origination costs - points and other settlement costs, on the new mortgage only; b) Monthly payments of principal and interest, on both mortgages; and c) Lost interest on (a) and (b), also on both mortgages. Cost offsets on both mortgages are tax savings, and reduction in the loan balance.
When Considering Refinancing for a Low or lower Interest rate, most borrowers incur refinance costs upfront that must be recovered over time through the savings generated by the lower interest rate. The critical number is the "break-even period" -- the minimum length of time you must hold the new mortgage to make the refinancing pay.
In most cases, the mortgages with the lowest rates are Fannie Mae Conforming loans. These are mortgage loans that are conformed to Fannie Mae guidelines and thereby are eligible to be sold to FNMA.
If you are refinancing out of an adjustable rate mortgage (ARM), you may still be better off by refinancing into a slightly higher interest rate than the interest rate that you will have when your mortgage experiences its first rate adjustment. This is due to the fact that an adjustable rate mortgage may continue to adjust to higher interest rates while the interest rate on a fixed rate mortgage will never change.
Refinancing for a Low or lower Interest rate would be a great financial move if you could consolidate debt into your mortgage loan as well.
Refinancing for a lower rate or just simply for a fixed rate can often be a great financial decision. Refinancing for a lower rate can many times save a person hundred's of dollars off of your mortgage payment and help ease a consumer's financial situation. Also, refinancing to lock in on a fixed rate versus keeping an adjustable rate mortgage can often be a very wise decision and save you tens of thousands of dollars, if not more, by locking your rate in now and saving yourself the grief of having your interest rate increased over time.
Reducing your mortgage terms are another overlooked benefit of a refinance. Interest Only refinances can sometimes lower your payment, and free up some cash that can be applied to paydown your principal. The principal paydown can not only save you on overall interest paid to the bank, it can also payoff your home quicker.
It is best to review all of your options when you are considering refinancing. Many times a slightly higher rate can offer you more benefit if you have the chance to consolidate more debt or put cash in your pocket.
In order to refinance your mortgage into the lowest rates having good credit is important. Check your credit for errors, make your payments on time and pay down your balances to maintain good credit. Refinancing your mortgage into the lowest rate can be accomplished having good credit.