For any homeowner who is thinking or has decided to refinance their home, make sure researching and fact-finding was done completely. Ignorance may be bliss in certain situations but when applying for a new mortgage, it will cause more harm than good. This means gathering the information that you need in order to secure a new loan as well as seeking out several lenders to see which one best suits the borrower. While the owner goes on a fact-finding mission, one thing that must be obtained is the current refinance rates. Since the purpose of refinancing is to give the homeowner access to extra funds that are needed elsewhere, a part to this equation is to know what is the current rate and find a lender whose rates are less than the one being paid in the original loan. Since this can be a tedious task to accomplish, let’s look at the types of interest rates there are and how these rates can give the borrower a peace of mind.
What does Current Refinance Rates Mean?
Before getting into a discussion on how knowing the refinance rates can help a homeowner save money, it would help to explain what does the term interest rate mean as well as what types are available to the borrower. When someone uses this term in relation to refinancing their home, it helps in determining what the borrower will pay monthly for the mortgage. When I say it helps to determine how much the homeowner will pay every month, other data needs to be added such as the term (length) of the loan as well as the amount of the mortgage. Sounds easy enough to comprehend its’ function; however, what may be the interest rate for a refinanced loan on Monday can quickly change and be different in a matter of days. That is why it is vitalto keep track of interest rates so the borrower can secure the best loan possible. Though the rates can appear to be unstable, there are loans available that can lock-in a rate no matter if it goes up in five years or fifteen years.
What is a Fixed-Rate Mortgage Refinance?
One type of a refinance is known as a fixed-rate mortgage. Commonly used, it helps the borrower to lock-in a suitable rate that will remain for the length of the mortgage. Being that it also includes fixed payments, one can see why many homeowners choose fixed rate mortgage finance. Those who would benefit from this type of a mortgage would be exposed to competitive rates, long term repayment schedule such as ten years or even in thirty years! Even though this type of a mortgage solves the issue of not having to be overly concerned with future rates, an individual should keep track of interest rates because you never know down the line if interest rates will drop. If it goes down lower than the rate you presently are paying, then a new mortgage with the lower interest rates may be just what the doctor ordered.
What is an Adjustable-Rate Mortgage?
Another type of a refinance is known as an adjustable-rate mortgage. This is also commonly used and offers a refinance mortgage with a fixed-rate period. This means that while a borrower may secure a loan that has a reasonable interest rate; this only covers the early years of the refinance term. Though many countries use this type of a mortgage, the borrower can end up taking a gamble after the early years of the refinance. Once that happens, the refinance mortgage will be subjected to what the refinance rates are at present. This means that if interest rates go down, the borrower will benefit with the current rate; however, if the rates go up, then the owner will end up on the losing side. While homeowners may not secure an interest rate for a long time period, this type of a mortgage bests suits an individual who plans for the refinance to be paid in a short-term or if someone takes a chance that rates will be lower than it is now.
How does Knowing the Current Refinance Rates Benefit Homeowners?
Now that you have an idea on what this refers to as well as some types of refinancing, a borrower should know how these rates can add up and paying more for a loan than necessary. One thing that is important is to not secure a loan after your first attempt but to shop around for a good deal. Though it is understandable to want access to extra income quickly, there is a good chance you would be kicking yourself in the butt and regret not going to more than one Mortgage Company. Depending on which lender offers the best rates, a homeowner also has to decide on if the loan is a short-term or long-term loan. Keep in mind that so long as a borrower knows the current rates the better the chance of obtaining a loan that will benefit homeowners.