Time to Refinance? Mortgage Interest Rates Are Low

Is it time to refinance? Mortgage interest rates in May 2009 are so low that you may find refinancing tempting. But is it the best time for you?
The first clue that it is time to refinance mortgage loans is that interest rates have dropped at least two percentage points below what you are currently paying. This is a significant enough sum that most people will recoup more in savings than they will pay in refinancing fees. However, your own situation may not fit the formula. If you do not stay in the house long enough for the savings from the lower interest to equal the refinancing fees you paid, you will actually lose money from the refinance.
Another reason to refinance mortgage loans is to get a lower monthly payment. If you are pinched financially, cutting the amount you pour into your mortgage each month can reduce your stress significantly. You can get a lower monthly payment by taking out a regular mortgage with a longer term, which means paying more in the long term but less per month. Or, if you plan not to own your house for much longer, you can drop your monthly bills even lower by taking out a non amortizing loan. When you refinance mortgage loans with a non amortizing loan, you pay only the interest on the loan for a grace period of several years. When the grace period ends, you are responsible for paying the principal off on an accelerated schedule, or even in one lump sum. However, if you sell or refinance the house before the end of the grace period, you get the benefit of lower monthly payments, and repay the balance of the loan with the proceeds from selling or refinancing the house.
If your analysis tells you its time to refinance, mortgage interest rates are ideal. On the other hand, your personal situation may not make refinancing a sound choice right now. Wait to refinance; mortgage interest rates will fall again. Either way, rely upon your sense of your own financial situation, not outsiders opinions or articles in the paper, to decide when you should refinance.