Refinance Mortgage – Does It Make Sense To Refinance My Mortgage?

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Now that interest rates are very low, is it a good time for everyone to refinance their mortgages? Actually, it is a great time to refinance if you have a higher interest rate than those available now. In fact, it is probable anyone who is paying a mortgage has a higher interest rate than those available now. However, not everyone is in the same financial situation, so let’s examine a couple of different examples and see when financing makes sense and when it doesn’t.The fact is there are very few people who couldn’t benefit by refinancing at the low interest rates now available. The problem is many people will not be able to get a new mortgage at this time. The reason for this is they owe more on their home than it would appraise at currently. If you are one of these people, the best you can do is just grind it out and keep paying your mortgage every month. At some point, housing prices will rebound and you will owe considerably less on your home than its value. I know it seems like this will never happen but the best you can do is just hang in there for now.Refinancing at 3.5%For those who have a six year old or older mortgage; you are in a great position. If you took your current mortgage in 2006 or prior to 2006 your interest rate is probably much higher than those available now. In 2004, 2005 or 2006 mortgage interest rates hovered around 7%. A mortgage on $150,000 at 7% for 30 years requires a monthly payment of $997.75. If this payment is paid off on a monthly basis, the payer will have paid $359,262 over the course of the loan.It is now possible to get a 3.5% mortgage. A $150,000 mortgage at 3.5% over 30 years requires a monthly payment of $673.57. Over the course of the 30 year mortgage, the payer will have paid $242,485. So, you can easily see refinancing is a great deal for an individual in this situation. First, he will be saving over $300 every month. Secondly, he will save more than $150,000 over the course of 30 years. Even if refinancing involves paying closing costs of $5000, it would still be worth it. In fact, it is commonplace to finance the closing costs.Refinancing at 4%Even if the lowest interest rate was not available to this individual; a refinance at 4% would also be a great deal. With this mortgage the monthly payment will be $716.12 and over the course of 30 years $257,803 will be paid. While the savings are not as large as those that would be gained with a 3.5% mortgage, this refinance would be very beneficial!In summary, right now is a wonderful time to refinance if a refinance deal is available to you. However, everyone’s situation is different and refinancing is an option that just doesn’t fit all homeowners at this time.