Should I Refinance My Mortgage Today Or Not ?

Should I refinance my mortgage today or not ? That is the big question these days. With the current mortgage rates fluctuating the way they have over the past few months, many homeowners have been toying with this question. Just a few months ago we were seeing interest rates as low as 4.25 % however with the given unemployment rate rising, the confidence in mortgage backed securities has declined somewhat, resulting in pushing up interest rates past the %5.00 mark.

So the question remains " Should I refinance my mortgage or not ?"

If your one of those people who feel they have waited too long and missed out on the opportunity of a life time, when interest rates were in the 4.5 %-4.75 % ranges, you might be wondering to yourself if you should just go ahead and refinance now before the rates rise up again. Or, you may still decide to hold out in the hopes that the rates will drop back down. Since the markets are difficult to predict, this is a tough decision to make. However the main question is, can you still drop your rates down by at least 2 percentage points? If the answer is yes, then there is still a window of opportunity to take advantage of.

There are some important factors that must be seriously considered before making applications to mortgage broker companies as well. Gone are the days when someone could just walk into a bank or mortgage broker and secure a loan with a 650 credit rating with hardly any background check done on them.
These are different times. Banks have already risen the bar as to qualifying applicants for a loan. This is not to say that it would be impossible to get a mortgage loan with a 625-650 rating, however, with the rates on the rise it may be difficult to secure a loan as lenders are becoming more stringent with credit ratings and other factors that determine a person's ability to make payments.

In order to get the best rates of say 5.21 % which is currently the lowest rates available at the time of this writing, an applicant will need to have a 750 credit rating or more to secure the best interest rates.

Remember if you are going to be making applications with lenders, they will perform credit checks on you which will hurt your credit score. It would be best to do all of your applications in the same month. That way your credit score will only be affected during a one month period as opposed to being affected over several months, which will hurt your score even more.

Another thing to consider, is how long do you plan on living in your home? Refinancing a mortgage can be quite costly. There can be penalties for breaking your current mortgage agreement, plus other costs and fees involved that can seriously eat into your potential gains. So if you plan on moving out of your home in the next seven years,it may not be in your best interest to refinance your mortgage right now.

Banks know that statistically, most homeowners live in their home for an average of 7 years, that's why they charge most of the interest up front in the first few years. This way, they can make the most amount of profit as possible.

One last thing, if after all consideration is done and you decide to move forward with a home refinance, make sure that you deal with a broker and not a broker bank.

Now what's the difference between the two ?

A broker bank is essentially a regular bank disguised as a broker firm. All banks in the US are exempt from RESPA laws which govern broker firms in regards to ethical practices.

This means that a broker firm is held accountable for its actions and is required to remain transparent in all financial dealings with its customers.

Banks on the other hand , are not held accountable by RESPA laws that protect consumers from unethical practices. They can mark up your interest rate without having to explain it to you. You are at the mercy of their unfair practices.

This is why you would rather use a mortgage broker firm instead of a bank. But remember to tell your broker that you are aware of RESPA laws just the same, this can always be useful when dealing with them.

Hopefully this will give a little bit of an insight in regards to choosing whether to refinance your mortgage or not at this time.