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Record Low Mortgage Rates: Time to Refinance?

News | 16th May 2012

Considering how low that mortgage interest rates have become for homeowners lately, there have been many have become respondent to these extreme rates.

Once the mortgage interest rates fell down to 5%, there was an influx in homeowners who refinanced. Maybe you remember shortly after when the interest rates dropped to 4.5% and there was even more of a demand to refinance. When the rates dropped all the way down to 4%, the increase in refinanced mortgages was even more substantial.

Current Interest Rates Lows

We have now come to a point where the rates have plunged once again. The median percentage is roughly 3.87% for a 30 year fixed-rate mortgage. Even if you have refinanced your home within the last year, making the decision to refinance now may not be such a bad idea.

According to an analysis conducted by, nearly 50% of homeowners who refinanced their home mortgage in the last quarter of 2011 have decreased the principal amount on their mortgage. Studies show that this increase in homeowners who’ve lowered the principal balance of their mortgage is the highest amount within the last 26 years. These homeowners lowered their interest rate percentage on average of 1.4% which is a drastic decrease when it comes to the total amount of a home loan.

Even if you have already refinanced the mortgage on your home loans, the reasons to do may still turn out to be advantages.

Pros & Cons of Refinancing Again

One of the advantages to refinancing your home is that in addition to lowering the interest rates on your mortgage, you’re also decreasing the principal balance on your home loan. Having the extra resources from refinancing your mortgage can help you to eliminate some of your existing debt elsewhere, add to your savings, or invest money back into the home. Utilizing the money you receive from refinancing your home mortgage can help you to improve your overall credit rating as well as making the process of getting a loan in the future that more easier.

Now that you know a bit about the benefits of refinancing here are some of the cons. When you decide to refinance your home loan, you are essentially putting yourself back into a 30 year loan. (Or your agreed term) If you are close to paying off your loan in its entirety, this may not seem like an attractive concept. Another downfall when it comes to refinancing is the paperwork and negotiation hassle of any other loan process. You will also be expected to cover all of the closing costs and other fees involved in refinancing. This will essentially reduce the amount of money you’ll be saving overall.

The Lower your Credit Score, the Higher your Interest Rates

It’s obvious that lending and banking firms won’t provide everyone interested in financing with these extremely low interest rates. Your credit score will directly affect your interest rates. If you plan on taking advantage of the 3.87% interest rate on your mortgage, you must have an exceptional credit score. If you want to position to save the most money on your mortgage and receive the lowest interest rates possible, evaluate and rectify all of your credit issues.

In order to better understand your financial situation, research refinance interest calculators to view your projected savings. Before making any rash decisions on whether you should refinance your home mortgage or not you should first research the current average rates, the pros and cons to refinancing, as well as rectify any credit issues.

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