What are the Best Refinance Mortgage Rates

Mar
07
2010

What are the Best Refinance Mortgage Rates

Finding the best refinance mortgage rates depends on a few factors one of them being where you actually live. Another, significant, factor is the type of mortgage you are looking for and whether you want to opt for an interest only mortgage (not recommended). That said, there are essentially 2 main groups that mortgages fit into:

- Adjustable Rate Mortgages
- Fixed Rate Mortgage

At the time of taking out a mortgage, on a comparative basis, you should expect a fixed rate mortgage to be slightly more expensive than an adjustable rate mortgage. The reason for this is that should mortgage rates increase significantly, with a fixed rate mortgage your payments will remain, as the name suggests, fixed. So for your servicer there is the possibility that they will be receiving less profit than they might have done otherwise. The benefit for you of course is that you know where you stand with regard to payments and can budget on a known factor.

Bear in mind that mortgage rates can also decrease, so if you take a fixed rate mortgage and this happens, then you will have a more expensive loan than you actually needed. All in all it is a judgment call as to which way you think the market will go against how much you value knowing what your monthly cost for the mortgage is going to be.

An adjustable rate mortgage on the other hand follows the market trend and will go up and down in line with market conditions. So this can be good if the trend is downward but that may not always be the case. In fact in current conditions, the likelihood is that before too much longer rates will start to go up again. There are no guarantees that this will be the case, but historically rates are currently about as low as they ever have been.

Other Factors that Affect Refinance Mortgage Rates

Having a good credit score will help you to secure a decent refinance mortgage rate
Also having a good deposit to put down. This means the loan is less risky for the lender as there is likely to be more value in the house than the capital outlay of the loan. Therefore more chance to get the money back should the borrower run into trouble
The last one is a low debt to income ratio, meaning you are more capable of repaying the loan

It’s not really rocket science, all these factors point towards a borrower who is low risk for the lender and consequently they are more prepared to offer a better deal to secure that business.

With respect to finding the best refinance mortgage rates, the best places to look are mortgage comparison sites. You will be able to put in your details and get quotes for various mortgage options. I have provided a link below to a site that does this which you can use as a starting point.

Before you start looking at the actual rates you can get, there is one more point that needs to be made. There is a loan type that is an ‘interest only’ loan, where you only pay the interest on the loan but not any of the capital owed. The intention with this type of loan is that you find an alternative way of paying off the capital of the loan at the end of the loan term.

There is a temptation to rely on the increase in the value of the property to cover this payment, hopefully with some left over to go towards another property. This type of loan on the face of it looks like a less expensive option in terms of the monthly payments, but it is a risky strategy as many people have found out to their cost. The worst case scenario is that the value of the property drops and you cannot clear the capital debt, so after paying for all the interest you can actually end up with negative equity the consequences of which means you could have an outstanding loan amount and no property. You can decide if that is a risk worth taking but you do need to be aware of the potential for this scenario.

Refinance Mortgage Rates