How to Take Advantage of Lower Mortgage Rates

So the economy is shot, the national spending is at an all-time low, and desperate lenders have lowered the average mortgage rate to attract borrowers. Should you take advantage of the low rates to refinance your existing mortgage? What do lower rates mean to borrowers like you? Read on, and find out what moves you are better off making when interest on mortgage rate is low.

Fixed Rate Mortgages

You've probably been told by an old-timer or two that you should consider refinancing when the new rate is lower than your present rate by at least two percentage points. Forget that advice. Ignore it. Don't do it. Sure, it worked back in the day but only because back then, you could get 30-year mortgages at a fixed rate! This strategy no longer works in our financial markets today, where there are more options than ever for financing housing, among them fixed mortgages that have terms of 30, 20, or 15 years.

What do you do to take advantage of the lower mortgage rate lenders are offering? Experts say you should first try to refinance to lower monthly payments. Or if you can't do that, then at least give up your adjustable rate loan for one that comes with a fixed rate.

Adjustable Rate Mortgages

An adjustable mortgage rate is affected by the changes that occur in the Fed rate. So when does it make sense to go with an adjustable rate?

If you plan to stay in the house for only a short period and you can get an adjustable mortgage rate for much lower than mortgages with a fixed rate, then go ahead and get an ARM.

If, on the other hand, you already have an ARM and you intend to stay in the house for a long time, you will be better off locking your loan in at today's lower FIXED rates.

Home Equity Loans

These loans change along with the prime rate so expect their interest rates to decrease or increase. Note, however, that no matter how many times their rates change, they remain higher than the regular mortgage rate lenders offer.

If interest rates are at an all-time low, go ahead and take out your own home equity loan!

Deciding to Refinance

So, should you refinance or not? If you decide to give refinancing a shot, contact your present lender first and negotiate that they waive some closing costs. If this one does not pan out, then get in touch with local lenders and ask for rate information. This can be a time-consuming activity, however. The most convenient way to go about it is by comparing mortgages online. There are many websites that let you do this. You may even ask for a quote from any of these websites.

Remember, when you're in the market for a lower rate and rates are at an all-time low, you can save a ton of money if you refinance!

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