If you purchased your home with a fixed-rate mortgage, you probably realize the market is bound to fluctuate while your monthly mortgage payment will not. If the market?s interest rate increases, you?ve made a good deal. If it decreases, however, you have some things to consider in terms of whether you should refinance to lock in the lower rate.
You need to keep in mind the percentage point break first. What is the difference between the rate you?re currently paying and the market?s present rate? Despite how attractive that lower market rate is, most people believe you should only consider refinancing when there is a full percentage point difference between what you?re paying on your mortgage and where the market?s currently at today.
Transactions fees charged by your lender are also important to note. When you choose to refinance, these are the fees you will be charged. Depending on what the fees actually are, you may end up losing more than you would have gained during the refinance process. Before refinancing, definitely take this into consideration.
Keep in mind also that you may be rejected. In fact, it?s not uncommon when more than half of Americans are looking to refinance right now. In the first half of 2008, for example, a significant percentage above half of refinancing applications were not approved.
This means there is yet another factor you need to consider. You need to meet certain criteria in order to refinance. The best rates you can obtain through refinancing will often be determined by your credit score. 720, though considered strong by some as far as FICO scores go, may still not be adequate to obtain the refinance rate you want. In order to get those low rates you?re looking for, the goal would be to have a 740 or higher.
You also need to shop around, as a final note. That rate may not be your best option. Visiting many lenders and doing your research is the only way to know. It is ultimately the best way to net yourself the lowest rate possible, even though it will take some time. It will undoubtedly be worth the effort, because this was what you were seeking in the first place.
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