According to Freddie MAC, the average mortgage rate for the month of August, in 2010 on a fixed rate 15 year loan slipped below 4%. To start out the month of September, mortgage rates on a fixed rate 15 year home loan slipped even further, with some banks reporting a rate as low as 3.75%. These are some of the lowest rates in history. These low rates have fell as yields within the Treasury bond market have been falling since the start of the the year.
Is Refinancing a Home Mortgage Right For You?
If you have a stable income and a decent credit score, it may be a good idea to convert your 30 mortgage over to a shorter term 15 year mortgage. You may end up with nearly the same monthly payment, yet you could save thousands of dollars in income.
You will need to take into account the current interest rate along with the balance and number of years you have left in your current loan. Also take into account the number of years that you plan to remain in your current home.
When you refinance your home mortgage there will be some closing costs and additional fees the bank charges to get you settled into your new mortgage. The bank may need to appraise your property, charge for a title transfer, and you may also need to pay some extra points on your loan. Do not be afraid to shop around for the best home mortgage deal. You should be provided with payment information up front with a good faith estimate from the bank.
Once you have the costs involved with refinancing your home mortgage, you will need to calculate how much per year that you will save with your new rate. In general you should make up the difference within a year or two. If you plan on staying in your home a little longer, then you can give yourself a little leeway and try to make up the difference within 5 years.
How Much Money will Refinancing a Home Mortgage Save?
For a loan for a higher amount of money, say over $150,000, the amount of money that you save on interest paid to the bank could add up to tens of thousands of dollars in savings in the long run. Plus, by converting to a 15 year mortgage you get your house paid off even sooner, so you can really take advantage of enjoying your retirement or sending your kids to college with a little less stress on your pocket book. If you are converting from a higher interest loan that is a 1 and half to 2 percent higher, you may actually be able to keep you monthly payment at about the same level.