mortagesandforeclosures

by Bradley Marmer

As the American economy continues its downward spiral, many homeowners are seeking to reduce their monthly expenses by looking for a lower refinance mortgage interest rate. For anyone struggling to make ends meet, this could be a viable option. You may want to consider the following factors, however, before you begin the process of refinancing your home.

Is a Refinance Right Now Worthwhile?

A lot of Americans are excited since President Obama passed his "Making Home Affordable" plan as part of the economic stimulus package. The requirement that lending institutions offer a 2% interest rate to those hit hardest by the failing economy and a loss of income is indeed something to get excited about. But do you qualify for it?

The fact is that you must be eligible for this great low rate. Your mortgage payments must be current and you cannot have fallen past due for more than 30 days in any month from the previous twelve. The payment for your mortgage needs to be 31% of your monthly income or higher, and you need to prove your financial hardship. If your mortgage was written by either Freddie Mac or Fannie Mae, you are also eligible for refinancing at the 2% rate.

If none of the above applies to you, then you must refinance at the prevailing rate offered by the lender. Sometimes the difference is not great enough to make good financial sense. Consider finding an online mortgage payment calculator as a way to help you decide.

Try putting your figures into an online mortgage payment calculator and this will give you a better idea if refinancing is worthwhile at the present time. You will need to know your current loan balance and interest rate, as well as the rate of your new mortgage. You will also have to input the term of both your current and future loans.

Bear in mind that this figure will not be totally accurate unless you know the amount of any fees or points that must be paid to refinance. Even without these figures, however, the online calculator will give you a good indication if refinancing is even a viable option in your circumstances.

Waiting and Watching for the Best Mortgage Refinance Interest Rate

If you are determined to wait until the best interest rate is being offered by your lender, you will have to exhibit some patience and keep a daily watch on overnight mortgage rate changes. The rate has remained stable in recent months, but that is bound to change at any time. You must be prepared to start the paperwork when the rate hits your target low.

Prevailing mortgage interest rates are based on a number of factors. One of them is supply and demand. If demand is high, the rate will go up, and vice versa. A cut in the Federal Reserve's prime rate will not necessarily mean that mortgage rates will also be cut.

In a bad economy, the Feds often lower the prime rate in order to stimulate borrowing. This causes prices to increase, often resulting in inflation. Inflation lowers the value of mortgage bonds, and this is what prompts lenders to increase the rate of interest on mortgages.

There is a lot to understand and follow when it comes to finding the lowest refinance mortgage interest rate. You may want to find a reputable company who can find a loan that will best fit your circumstances and can alert you when your target rate is available. This could be the smartest course of action right now.

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