Take Advantage of the Lowest Mortgage Rates Today

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Author: Karen Zabel

The housing market may be slow, but with mortgage rates near all-time lows, the mortgage industry is doing a bustling business in refinancing, as homeowners trade in their high-interest mortgages for low-interest loans that can save them thousands. Obviously, if you’re considering buying a home, now is a great time to take action, and lock in these near historic low rates for the life of your loan. But if you’re a homeowner with a current mortgage, how do you know if refinancing is the right move for you?

Whether or not you could benefit from refinancing depends on a number of factors, chief of which is the interest rate you’re currently paying. Mortgage industry leaders used to tell homeowners that unless a new loan offers an interest rate that is at least 2 percentage points lower than their current mortgage rate, refinancing did not make good fiscal sense. But with added discounts and incentives, that benchmark figure has been largely overturned. Today, even a half a percentage point can have a significant benefit when applied for the life of a long-term loan like a mortgage.

Low interest rates mean this is also the ideal time to refinance an existing mortgage in order to “cash out,” or tap into your home’s existing equity to make large purchases or cover other large expenditures. Sure, some borrowers with excellent credit may be able to handle large purchases with credit cards or personal signature loans. But these vehicles carry high risk for the lender, and so typically carry high interest rates and stringent penalties.

In today’s low-interest marketplace, refinancing your home or taking out a second mortgage, or home equity loan, against the equity in your home makes good sense. If you’re planning on making home renovations, or have a major life event, like a child’s wedding or upcoming college tuition, refinancing to obtain cash from your home now is a great idea, and one that can save you thousands of dollars over time.

Many homeowners use refinancing as a way to finance major home improvement projects and renovations that can improve your quality of life now, as well as add value to your home. By making improvements that increase your home’s value, you automatically increase the equity you have in your home and also make it more valuable and marketable to potential home buyers if you decide to sell your home in the future.

Equity from a refinance is also a great tool for growing an existing business or starting a new business. You’ve put thousands of dollars into your home; isn’t it about time your home paid you back? Tapping into your equity can provide you with large sums that can launch your business or take it to the next level, improving your financial profile along the way.

Refinancing can also provide a large influx of cash for a once-in-a-lifetime trip or family reunion, or to pay for a child’s wedding or college education, ensuring they begin their lives with a fresh, debt-free start.

And some homeowners use refinancing as a sort of personal debt consolidation program, paying off high-interest debt, like credit card debt and personal or signature loans, with low-interest money. If you have significant credit card debt or other loans that carry a high rate of interest, refinancing at a low interest rate is another way to save hundreds or even thousands of dollars over time. Even if your credit card interest rates are currently low, if you carry a high balance, it can be a good idea to take out a low-interest loan now and pay them off, rather than risk arbitrary rate hikes by credit card issuers in the future. Even a single missed payment can cause your interest rates to go sky-high. Paying them off now with low-interest cash is a safeguard that can offer you significant peace of mind.

If refinancing is right for you, or if you’re ready to buy a new home, now is also a great time to get lenders competing for your business. A slow housing market means lenders are more willing to consider discounts in rates and other fees to get you to sign with them.

In addition to interest rates, there are other ways to save money on your mortgage. Mortgages typically involve a wide range of fees payable at closing which need to be factored into any refinancing costs to determine the actual savings. Fortunately, recording fees and other closing costs offer potential borrowers another chance to shave a few more dollars off their mortgage. Many borrowers can shave hundreds of dollars off the closing costs on their mortgage, simply by having certain fees removed. If one lender is unwilling to remove junk fees, chances are another lender will give the OK.

Today’s low interest rates mean the time is right to refinance your home, or to finally move ahead with that home purchase you’ve been dreaming about. Surfing the web is a great way to start learning about low-interest loans being offered in your area.

Karen Zabel is a freelance writer who writes about specific topics such as how to find the lowest mortgage rates .