How To Reduce Your Mortgage Interest Rates

When it comes to buying a home, your mortgage matters just as much as the cost of your home. Interest might seem like a small percent, but when compounded over thirty years, it can literally double the amount you actually pay. If you want to lower your payments and pay less for your house, you should consider the many ways you can lower your interest payments by refinancing.



Taking advantage of a changing housing market is one of the easiest ways to lower your interest payments on your mortgage.



If you have a fixed interest rate and interest rates are dropping, you can refinance to an adjustable rate or a lower fixed rate mortgage. If rates are rising, you can do the opposite and change from an adjustable rate to a fixed rate; this can keep your interest rates from skyrocketing.



You may be able to lower your interest rate by taking advantage of an improved credit history. If your credit rating was low when you first acquired your loan, you may have a high interest rate.



If you've been paying your bills on time, your credit may have improved, in which case you might qualify for a lower rate. There are many credit repair companies that can help you improve your credit. Beware of credit consolidation companies, which actually can further damage your credit!



If you have two loans, a first lien and a second lien on your home, you may want to consider consolidating those two liens into one. Many people get equity lines on their homes, but don't realize that the equity line is adjustable, and often has quite a bit higher interest rate than the first loan.



Refinancing the two loans into one can often save money. Another strategy would be to pay down the equity line as soon as possible.



10-year and 15-year fixed mortgages usually have lower interest rates because the loan is getting paid twice as fast as a 30-year mortgage. The down-side is that the payments will be quite a bit higher.



No matter why you decide to refinance, always be sure to speak with several lenders first, or find out who your friends and colleagues use.



Good referrals are the best way to find a mortgage professional you can trust. Sometimes brokers may give you a quote that is not what you eventually get. Be sure to ask for a good faith estimate and ask to see proof that your loan is locked at the rate you are quoted to ensure it is the rate you actually get.



Beware of low start rate programs. They are usually not the actual interest rate, and may be simply a teaser or a negative amortization program that defers your interest payment until a later date.



This can help lower payments, but not the actual interest rate or amount you'll owe in the end.



Remember, before you take advantage of any refinancing offer, find out if it will actually save you money. On-line mortgage calculators help determine how much you'll pay using your new and old interest rates. Then you can just deduct the points and fees (unless they're included in the new mortgage) and find out how much you'll actually be saving.

1st And 2nd Mortgage Refinance Loan - Refinance And Lower Mortgage Payments

Refinancing both your first and second mortgage will lower your monthly mortgage payment and qualify you for overall lower rates. It will also save you money on closing costs and application fees. And while you are looking at rates and terms, you can reevaluate your loan's payment schedule to better fit your budget needs.



Why One Mortgage Is Better Than Two



Lending companies prefer financing one total mortgage rather than two separate loans.



So second mortgage rates are at least a point higher than first mortgage rates.



Refinancing your two mortgages into one will qualify your for a lower rate mortgage. Since lenders charge flat application fees, you will save money by going through the process only once. Closing costs can also be cheaper.



Readjusting Terms



In all likelihood, your mortgages have different terms. Refinancing is a good time to reevaluate those terms and decide what would best meet your budget concerns.



If lower payments are your concern, then choose a longer term. While this will increase your total interest costs, it will ease your immediate budget concerns. Then when your financial situation improves, you can make principal payments to offset the interest costs.



When concerned about interest costs, it's best to opt for a shorter term with its lower rate. You can also pay points to further lower your rates. But this is only wise if you plan to keep the loan for several years in order to recoup the costs.



Separate Is Sometimes Better



In some cases, it is better to keep two separate mortgages to save money. In some instances, refinancing your mortgages individually will get you better rates overall. This is especially true if your total mortgage principal equals more than 80% of your home's value.



If you plan to cash out part of your home's equity while refinancing, you may also want to finance a second mortgage separately. Cash out refi loans automatically boost your loan's rate.



In order to find your best option, request quotes for refinancing your mortgages together and separately. Also look at several different lenders to be sure you are getting the most competitive offer.