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Low mortgage rates: 3 ways to refinance now

[Jul 7, 2010.]


Mortgage rates have fallen to their lowest levels in 50 years, which means that it could be time to refinance your mortgage loan. If you've been waiting for a great refinancing deal, the time is now.

Low mortgage rates and low home values: can you refinance?

Although low mortgage rates can help borrowers qualify for larger loan amounts, falling home values have caused many refinance applications to fall through. Refinancing your mortgage is partly contingent upon your current home equity; if your loan-to-value ratio (LTV) after refinancing will be higher than 80 percent of your home's value, you may not qualify for refinancing using a conventional mortgage loan.

If you have enough home equity, however, there are several compelling reasons for refinancing now:

  • "Straight" refinance: This means that you refinance your existing mortgage amount to a lower mortgage rate. A straight refinance mortgage is the most common type of refinancing. By lowering your mortgage rate, you also lower monthly P&I payments, and provide flexibility for pre-paying your mortgage.

  • Reduce repayment term: Paying off your mortgage before retiring (or sooner) can help increase your financial security. Current low mortgage rates can make it more affordable to refinance to a 15-year mortgage. Using mortgage calculator tools can help estimate potential savings by refinancing to a shorter mortgage term; it may be possible to save thousands of dollars over the term of your loan.

  • Funding home improvements: Low mortgage rates make major home improvements more affordable and less risky than financing work through contractors. If you're concerned with having enough home equity, contact FHA lenders for information about refinancing to an FHA 203(k) loan. This loan provides funding for paying off your existing mortgage, along with the cash you need to complete home improvements. FHA guidelines determine eligible home improvements. FHA 203(k) loans can also provide refinancing at attractive rates up to 97.5 percent of your home's current value.

The downside of refinancing includes ongoing concerns about the economy and unemployment; if you have sufficient emergency savings and no immediate worries about your job, refinancing could be a good financial decision. Consult a financial advisor for determining your best mortgage refinancing options, as there can be tax considerations. If you're ready to refinance, request several mortgage quotes today. Mortgage companies want your business, and can help you find the right mortgage refinancing choice for meeting your goals.


About Author:

Karen Lawson is a freelance writer with extensive experience in mortgage banking and home loan loss mitigation programs. She holds BA and MA degrees in English from the University of Nevada, Reno.

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