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Mortgage rates are on their way down, with many hitting levels not seen since July 2003.

There's a twofold reason for this: the Federal Reserve is using all of its weapons to try to get the economy rolling again, and to this end, it cut short-term interest rates to near zero, allowing banks to borrow money for almost nothing.

In addition, the government is backing 90% of all mortgages issued, and the Federal Reserve has promised to buy more mortgage-backed securities and direct debt from Fannie Mae and Freddie Mac. It's also considering buying long-term Treasuries. This is a boost of confidence for lenders.

Our most recent survey taken Dec. 31 found the average interest rate for a 30-year, fixed-rate loan was 5.64%. But a search of our extensive database of the best mortgage rates from across the country shows lots of lenders offering loans at 5.25% or less, with fees under $1,000.

That means you should seriously consider refinancing if:

• You're paying more than 6.5% on any kind of mortgage.
• You have an adjustable-rate mortgage that has recently reset or is going to reset over the next year.

 Although rates are important, the key to a successful refinancing is staying in the house long enough to recover the cost of a new loan.

If, for example, refinancing cuts your payments by $100 a month, but you paid $2,000 in closing costs to obtain the new loan, you would have to live in that house for 20 months before you actually begin saving.

With that in mind, take a look at our 4 great reasons to refinance your mortgage and see if they can help you.

Reason 1.  Lower your monthly payment.

An old rule of thumb says you shouldn't refinance unless you can save two percentage points on your mortgage rate. But if you can save even one percentage point, you're throwing money away every month by not refinancing.

If you're interest rate is 6.5%, you're paying $632 on every $100,000 you borrowed. Refinance into a 5.25% mortgage and your payments drop to $552 a month -- that's a savings of $80 a month or $960 a year on every $100,000.

If you can get a new loan cheaply enough -- fees of $1,000 or less -- you probably would be able to pay off a credit card or do some much-needed home repairs with your savings.

Reason  2.  Get out of an increasingly expensive adjustable-rate mortgage.

Many borrowers over the past few years were given artificially low introductory or "teaser" rates on adjustable-rate mortgages. If that rate is about to end -- or has already ended and begun to rise -- you should refinance.

While that initial rate was probably less than you could get on a fixed-rate loan, the new rates will be higher -- maybe much higher.

Reason 3 . Free up cash from your home.

High on the list of reasons to refinance is the popular "cash-out" refinancing that allow you to borrow more than you owe on your current loan and pocket the difference.

Let's say you owe $100,000 on a $200,000 home. You could refinance for $125,000, pay off the $100,000 balance on the old mortgage and keep $25,000 for yourself. That's an attractive option now that low interest rates are available.

With good credit, most lenders will allow you to refinance up to 80% of your equity -- in this case, $80,000. Generally, we do not advise taking 80%, but it's there if you need it.

Reason 4. Reduce your interest payments.

If you can handle higher monthly payments, you can save in the long run by refinancing into a shorter-term mortgage.

Switching from a 30-year at 5.25% to a 15-year loan at 4.75% means your total monthly payments would grow from $632 to $778 for every $100,000 you owe, because you'd be paying the principal back twice as fast.

But you'll ultimately save money two ways:

• The shorter the loan, the lower the interest rate. While you can get a 30-year mortgage for 5.5% or less, you could refinance into a 15-year loan for 4.75%. You're paying less in interest and cutting the length of your mortgage in half.
• The faster you pay off the principal, the less interest you'll pay over the life of the loan. Instead of spending $98,793 in interest for every $100,000 you borrow at 5.25%, your total interest costs on a 15-year loan would be $40,010 for every $100,000 you borrowed.

If you can't swing the 15-year payments, check the numbers on a 20-year mortgage. You could save close to $40,000 at 5.25% interest by choosing a 20-year over a 30-year mortgage.

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HARMEYER MORTGAGES AND REALTY - 1225 W Beaver St - Jacksonville, Fl 32204
Office Phone: (904) 738-8899 Fax: (904) 738-8667

    
We lend in the following states: FL

1225 West Beaver Street

Jacksonville, Florida  32204