Home Refinance Rates

Home refinance rates are just slightly different than regular mortgage rates. They are a little bit higher, but the rates still depend upon many factors to set the final rate. When you consider the different fees than can be involved, appraisals of property and other costs of refinancing, the loan may not seem as advantageous as originally thought. Refinancing does, however, definitely have its place in the financial mix for consumers.

Why Do Homeowners Refinance?

Homeowners cite many reasons for wanting to refinance their home mortgage. Most are looking to save some money, while others want to free up a large amount of cash for bill consolidation or investments. Saving money for some means actually cutting down the costs of the entire mortgage; for others, saving money means getting a smaller monthly payment that is easier to manage.

Here are some primary reasons why homeowners would consider this financial move:

• They want to get a lower interest (APR – annual percentage rate) rate for the large amount of money still owed on their home mortgage.
• They want to shorten the term length of their mortgage commitment. With lower interest rates, they may be able to cut the term in half while only paying a few more dollars monthly. This depends upon their previous interest rate.
• They may want to lengthen the term of their mortgage commitment. With lower interest rates, they may be able to raise the amount borrowed to get some cash back, and/or extend the length of the mortgage rate at a lower interest rate and still get lower monthly payments.
• If they have an ARM (adjustable rate mortgage) it could be very cost efficient to switch over to a low fixed rate that is guaranteed to remain low for the entire term of the commitment. ARM mortgage rates can fluctuate and rise or fall, depending on the federal prime rate.
• If they have a high fixed interest rate, they may want to get a much lower rate on an ARM mortgage to save money on payments. This is only a good move if the economy is expected to remain stable so the federal prime rate does not skyrocket.

The home refinancing rate is only a little higher than the going regular mortgage interest rates. For example, most refinancing loans for any length term range between 4.0% and 5.24% interest rates. According to bankers, refinancing should be researched. A difference of only 1% to 2% in the home refinancing rate and the old mortgage rate can make it worthwhile. Amortizing the payout schedule can determine exactly how much savings can be incurred, and at what month the savings will begin to happen.

Loan origination fees and other costs for appraisals, title searches and possible application fees can lower savings. Costs can range between 3% and 6% of the principal amount of the new loan. If you keep the payments the same under a lower rate, you will build equity in the home faster. The other option is to use the lower rate to obtain significantly lower monthly payments, perhaps hundreds of dollars a month lower.