Record Low Interest Rates Lead To Refinancing Opportunities
The entire financial debacle of the last two years was sparked off by a relatively small segment of the American home mortgage industry. Of course, we are all well aware of the term “Sub-Prime Mortgage” now, but a few years ago, most people had never heard of the term. In fact, most of the people who were sub-prime borrowers didn’t even know the term!
By simple definition, a Sub-Prime Mortgage is a mortgage note issued to a lender that could not qualify by traditional standards. As a sub-prime borrower, these higher risk loans were offered at higher interest rates, and many were, of course, issued as adjustable rate mortgages, which meant that the interest rate was pretty low for the first few years of the loan, but after a certain period, the interest rate jumped substantially, which subsequently caused the monthly payment to jump substantially, which, in turn, caused thousands of Americans to immediately enter into default in 2007, 2008, 2009, 2010, and now 2011.
The Federal Reserve responded by immediately slashing interest rates in the U.S. in hopes of staving off another Great Depression. These record low interest rates have yet to cause a huge turn-around in the U.S. economy as the housing market and labor market remain under intense duress 2011, but these record low interest rates have provided a great opportunity to refinance homes.
Have you refinanced yet? Quicken Loans can rush your refinance through very quickly so if you are in a hurry, give them a call.
Benefits of Refinancing
If you purchased your home before 2009, chances are you locked in an interest rate that is higher, and possibly much higher, than the typical 15 year and 30 year fixed rates that are currently available as of the second quarter 2011. Currently, fixed rate mortgages on 30 year loans are well under 5% depending on your credit history and financial situation.
By refinancing your home, you are basically applying for the terms of your loan to be modified. The primary term that you most likely want to change is the interest rate. A lower interest rate will, of course, cause your monthly payments to be lower, it could cut several years off the life of your loan, and it can free up working capital.
Costs To Refinance
Typically, there are some costs when refinancing a mortgage. It depends on the specific lending institution and loan modification program, but sometimes these costs are fixed into the loan, while other programs and institutions require the costs to be paid up-front in cash.
Check with your lending institution for more details on how much money you can save on your monthly payments by locking in these record low interest rates while they last.
If your rate is over 5%, you should definitely check with your bank. The interest rate at our current resident is at 4.75% so it is not worth refinancing. Our rental has higher interest rate though so I need to talk to the bank about it. This is a guest post.