Locking in the Best Mortgage Rate on your Home Loan
News about fluctuating mortgage rates is more than common. So many factors affect mortgage rates that there is no certainty whether they will rise, fall, or stay consistent day to day. While many home owners carefully watch the market to take advantage of the best mortgage rates and savings on their home loans, it is difficult to determine when exactly is the best time to lock in a rate and maximize your savings.
Consider the Numbers
If you want to save money on your home loan by refinancing, it is important to first consider your current mortgage rate and home value to make sure you will actually save with a rate reduction. Home refinance options generally cost a few thousand dollars depending on your home value, and in order to make a refinance profitable, you will need to make sure you can recover the money you spend in fees in under two years.
Just because you can lower your interest rate and save some money each month does not mean that a refinance will save you money on your loan over the long run. Comparing current rates against your existing home loan rate will help you get an idea of how much you can expect to lower your interest payment and decide if it will be worth it to pay the fees for a refinance. If it will cost you more to pay for the refinance than you will save, you are better off sticking with your current loan.
Historical Research
While there is no way to tell whether you are going to get the absolute lowest rate possible, there are ways to discover if you are going to get a decent rate on your refinance. Doing some research on rates both nationwide and in your area over the past six months is a good way to see if rates have been dropping or if they are on the rise. If there has been a steady drop in rates and they haven’t bottomed out yet, it is probably a good idea to keep a close eye on them for a few more weeks and see if they will continue to decline. If they have dropped but have bottomed out and have started to rise again, it is likely a good idea to move as quickly as possible to lock in a new mortgage refinance.
Keep in mind that there are mortgage experts who make a living predicting mortgage trends, and not even they are able to determine future mortgage rates with 100% accuracy. Speaking with an experience lender as well as doing your own research is the best way to find out if you are making a well-timed refinance decision.
Refinance and Repeat
Remember that you are allowed to refinance your home more than once as long as it makes financial sense. If you move forward with a refinance and rates continue to drop, you might be able to save even more money if you do another refinance six or twelve months down the road. While it isn’t wise to refinance as often as possible, if you see an opportunity to save further down the road, don’t be afraid to take it. Your home is likely your most important financial asset, and saving money on your loan will help you build equity as well as a secure financial future more quickly.
Jessica Thorseon writes for MortgageRefinanceRates.org, a site that helps home owners learn about mortgage rates, refinance options, and up to date mortgage news.
.
