Bad credit refinancing

If you are looking to refinance your mortgage interest rate then now is probably a good time. The financial crisis has left many people struggling and defaulting on their loans, which have left banks more open to refinancing at a favorable rate to you if you have good credit. The question then becomes whether you should refinance or not.

While having a lower interest rate can save you money in the long run in the short term there will be closing costs that you must cover. The average closing costs on a $200,000 loan is $3,118. To this figure you will also have to factor in other costs such as fees, taxes, insurance, and association dues. So you’ll need to calculate the amount of money that you are saving and how long it will take to recoup these costs.

So for example if you are saving $100 in interest expenses it will take you 31 months before you begin saving money. In general refinancing to a lower interest rate only makes sense if you plan on being in your current house for another 4 years or more. If however you plan on moving and selling your home then you would be better off on keeping your current loan.

Another reason that you might be interested in refinancing is that you want to consolidate debt or extend your payment from 25 to 30 years, thus lowering your monthly mortgage costs. In these cases refinancing can make sense. You just need to weigh the over all costs and benefits.

One way to keep abreast of the current mortgage interest rates is through the BankRate.com and Mortgageloan.com websites. They keep track of current mortgage and housing trends and provide you with the latest news in their free newsletters.

Finally you will want to get a copy of your credit report before applying before trying to refinance your mortgage at a lower interest rate. You can do this at FreeCreditReport.com once a year.

By: Palmer Owyoung