The formula to refinance mortgage loans is simple. If you save more to refinance mortgage loans, then what are the expenses from the refinancing, then it will be a smart move.The basics, before you start, is to know, whether you have a variable or fixed interest rate.
The Economy Moves The Interest Rates.
When you think to refinance mortgage loans, you will notice, that the economy moves the interest rates, because the interest is the price for the money, and when the demand for money, i.e. loans, decreases the price will also decrease.The ideal timing to refinance mortgage loans is the economic downturn after the interest rates have fallen and the banks have difficulties to sell loans. Then they will be responsive to listen to your ideas for the home mortgage refinance.
How Much Lower Should The New Interest Rate Be?
When you refinance mortgage loans, the process can bring extra costs to you. You have to calculate carefully, whether the lower rate will compensate the extra costs and how long does it take. A rule of thumb says that you should get at least 2 % reduction in the interest rate before the refinancing is reasonable.
Different Mortgage Types.
The mortgages are not all equal. Usually, the short term mortgages have lower interest, but the monthly payments are higher. On the other hand, they offer smaller total costs because some years you will pay smaller. Read more here.
Concerning the interest, you can choose between the fixed rates and the variable rates. Now if your financial planning horizon is long, maybe life-long, and you want to live in your house for a long time, maybe the fixed rate is reasonable. At least, it will be secure, because you know, how much the loan costs will be.The variable interest can jump suddenly, and this may cause problems for you. During the financial crises and a long time after that, the interest rates are at a historically low level, but that cannot last forever.
The Origination Or Discount Fees.
These both are fees, which you have to pay to the lender when you close the deal. If you refinance home mortgage loans, you have to pay these items. There are also zero cost or no cost mortgages, which do not have these fees, but the lender will most probably charge the amounts as a higher interest.
It can happen that your current lender wants to keep you and will offer a good deal. But that you cannot know until you take quotes from several lenders. The online comparison sites offer great services, and you will get the quotes quickly.