When to Refinance Your Mortgage

If you live in Seattle and have a high interest rate compared to today's interest rates, or if you have a variable interest rate on your mortgage, you might want to take a look at refinance mortgage rates to decide if it would be a financially sound idea for you to refinance your mortgage.  If your interest rate for your mortgage is three percent higher than the current prime interest rate, or if you feel that the prime interest rate is about as low as it will go during the life of your loan, you have a good reason to refinance.

If you are locked in to an interest rate that is three percent higher than today's prime interest rates and you refinance you can probably reduce your monthly payment significantly without the cost of refinancing the loan outweighing your savings.  Because you have to take in to consideration the cost of taking out a new loan, you should not refinance your mortgage every time refinance mortgage rates drop a tenth of a percent.

Lenders charge closing costs and you can pay points to your lender, all of which makes your refinance loan cost more, even if the refinance mortgage rates are presently lower.  Though you want to do everything you can to reduce your cost of living in Seattle, you do not want to make the mistake of increasing the overall cost of your home.  

Another reason you might want to refinance your home is if you have a variable interest rate.  Perhaps when you took out your mortgage the rates were very high so you chose to get a variable interest rate.  When mortgage rates are high it is common for a variable interest rate to be lower than a fixed interest rate.  

Choosing a variable interest rate would have been a good choice at that time if now mortgage rates are significantly lower.  Because you saved by getting a variable interest rate and now you can refinance with a lower fixed interest rate, you have managed to get the best of both worlds.  Of course, what you did was a risk because there was the possibility that your rates would have only increased and never decreased and you would have spent more on your home than others in Seattle who locked in at the fixed rate when you did not.

At any rate, you would save money now by refinancing your mortgage if you are locking in a fixed rate that is lower than your original variable rate.  You will also save money if you refinance a fixed rate mortgage if it is more than three percent higher than today's interest rates.

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