Your Questions About Mortgage Refinancing Rates

Nancy asks…

What is mortgage refinance?

What is mortgage refinance? I have a house, and I’m nearly pay off. Someone was telling to refinance to purchase another house.

John answers:

Mortgage refinance is paying off the old mortgage by obtaining a new mortgage on the property. This may be done because the old mortgage has a high interest rate and the new mortgage has a lower rate so that your monthly payments are lower. For example, your 30 year 7% mortgage has 23 years to run and you can get a new 30 year mortgage at 5.5% with a balance large enough to repay the first mortgage. Your monthly payments would be lower because you have a lower interest rate and the payments are stretched over 30 years instead of the remaining 23 years.

With your house nearly paid off, you could refinance by getting a mortgage for a larger amount than your current mortgage. You could then use the additional money you borrow to invest. Whether this is wise depends on many factors, including your investment experience, your desire to increase your debt and make payments for many more years, the type of investment you plan to make, and many other factors. Borrowing on your house to buy a second house would leave you with two large mortgages which may be defficult to pay. Think twice before you get into such a situation.

Chris asks…

Refinance Interest Rate?

Me and my wife are planning to refinance our home; and I am also a part owner of a property that is free and clear, our loan agent told us that we have to pay a higher interest rate because of that. Is it true?

John answers:

Refinancing a mortgage at a lower interest rate isn’t always the right decision. Having bragging rights at the neighborhood picnic isn’t a reason for refinancing a mortgage. Instead, it’s good to put some thought behind the timing of your decision.

Mark asks…

My mortgage rate is already low. Should I refinance my mortgage loan?

John answers:

When mortgage rates are dropping, many people get caught up in the frenzy and find themselves refinancing every six months. If you already have a low mortgage rate, remember that refinancing does cost money. If the current mortgage rate offered is around 2% lower than your current mortgage loan rate, it is probably a good idea to refinance. If the mortgage payment for a proposed 15 year mortgage loan will be the same as your current 30 year mortgage loan, then this would also be another good reason to refinance.

Donald asks…

Mortgage Rates Question?

I am in the middle of refinancing my home, but the rates have recently gone up. Are there any signs the rates will drop back down to the rates they were a couple of weeks ago?

John answers:

I don’t think rates will go down. I think they will be right around what they are now for a while and then go up. Within two or three years I expect rates to jump a huge amount- so I think refinancing right now is a great idea.

Thomas asks…

Mortgage rates Rise?

How come mortgage rates continue to rise, when one would think that with the recent housing crunch one would think mortgage rates would be dropping. Is it the banks have tightened credit so much, that it is forcing rate higher..due to availability of $$. Is this run up in rates only temporary and will we see them drop back down again soon?

John answers:

Mortgage rates are tied to long term bonds. The Fed cuts drop the short term rates only. Historically, when short term rates drop, the long term rates go up, and this what we are seeing.
Don’t forget that the economy is where it is now due to low mortgage rates years ago. Too many people over bought themselves because of the low rates and are now defaulting on their loans. The higher rates now will help prevent this, although I’m hoping for a drop to refinance.

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