Mortgage Calculators, Profiting with Lower Mortgage Rates

When mortgage interest rates are low, consumers can take advantage of the lower rates to refinance their mortgage, buy a new home, take out a home equity loan, or purchase a car.  There are a variety of opportunities and financial steps that should be considered during periods of low mortgage interest rates.  After all, low mortgage rates are surely not going to last forever.  Analysis of the opportunities when mortgage rates are low is often best tackled with the mortgage calculator.

A mortgage calculator can first be used to determine the amortization schedule remaining on a homeowner’s current home loan.  With this task, a homeowner confronts their current mortgage rate, the remaining balance and the monthly mortgage payment.  In many cases, these figures will lead to the conclusion that the present mortgage rate environment does not warrant a change in financial position.  Running the mortgage payment calculator and terms comparison mortgage calculator may assist in detailing the impact that low mortgage rates will have a new home loan.  Low mortgage rates combined with the inherent tax deductibility of the interest portion of mortgage payments make additional borrowing a worthwhile consideration.  For those consumers who believe increased interest rates and inflation are waiting around the corner, the ability to borrow now at low fixed rates only to repay the debt with inflated dollars is a good financial opportunity.

When interest rates are moving lower and there is a reduction in interest rates by the Federal Reserve, this doesn’t always result in drastically lower rates for fixed-rate mortgages.  Mortgage lenders primarily use existing mortgage bond rates and the secondary credit markets, not the Fed Funds rate to determine fixed rate mortgage rates.  This is why fixed rate mortgages have traditionally been more stable or sticky when rates move lower.  Since interest rates generally will move in the same direction over time, watching the general direction in the movements of interest rates can be fruitful.  Running multiple what if scenarios with the mortgage payment calculators can be a fruitful endeavor for reflecting on future rates and repayment schedules.

There is an old wives tale that forewarns existing homeowners that it only makes sense to refinance an existing mortgage if the new interest rate is two percentage points lower than your current rate.  This is unfortunately, a tale that is untrue.  New trends in the mortgage business make this bad advice.  An existing mortgage holder with a $325,000.00 loan and an interest rate of 7.25% for 30 years would be well suited to refinance that debt to a new 30 year fixed rate mortgage with an interest rate of 6.50% and no closing costs, a common mortgage product.  The savings on this transaction would be approximately $160.00 per month and that is with a difference of .75% on the mortgage rate.  Mortgage payment calculators and specifically no cost comparison mortgage calculators can efficiently measure the benefit gained by small reductions in mortgage rates.  A worthwhile caution is to measure the change in the payment period left on the existing mortgage loan with that of the new home mortgage.

The two points rule was good for a 30-year fixed rate mortgage but it doesn’t apply in present financial markets where you have many home mortgage products and options.  Not only is there plethora of no point and no closing cost mortgage loans, but fixed mortgages now have terms of 15, 20, 30 or 40 years.  There are five and seven year balloon loans.  There is a wide variety of an adjustable rate mortgage or ARMs.  Not only will the mortgage payment calculator assist in weighing these options but the adjustable rate mortgage calculator will certainly have value for those loan types as will the term comparison mortgage calculators.

Even if you can’t substantially lower your monthly payment by refinancing, it may make sense to give up the insecurity of an adjustable rate mortgage for a fixed rate.  Adjustable mortgage rates are affected more by changes in the Fed Funds rate because these types of loans follow short-term interest rates, such as Treasury bill rates, which follow the Federal Funds rate.  An adjustable rate loan does make sense in some circumstances.  If you plan to stay in a home for only a few years and you can get an ARM for significantly less than a fixed rate mortgage, you may come out ahead by going for the ARM even if rates creep up.  Adjustable rate mortgages are also popular with people who may have difficulty qualifying for a loan at higher fixed interest rates.  The lower ARM rate lowers their monthly payment, making it easier for them to qualify for the loan.  Apply the adjustable rate mortgage calculator with several loan types and be sure to enter rate adjustments that cover a wide range of future rate changes to get the most out of the value of that tool.

On the other hand, if you have an ARM and decide to stay in your house for the long-term, consider looking at a fixed rate mortgage if you qualify for a good competitive rate.  Unless you are a wheeler-dealer type, fixed rate mortgages provide stability and peace of mind for the long term.  Mortgage rate comparison calculators will ascertain the advantages and drawbacks in rapid time to help settle any ambiguities over the right loan selection.

A period of low interest rates may also make a home equity loan an attractive proposition.  Home equity loan rates are directly affected by the Federal Reserve’s interest rate increases and decreases, although home equity rates are always higher than regular mortgage rates.  A home equity loan gives you the flexibility to use equity that you have established in your home to pay for college tuition, home improvements, reduction of expensive credit card debt, or even a new car.  An important consideration regarding the choice of home equity loans is that these mortgages are usually adjustable rate loans.  When comparing the benefits and cost of these mortgage products be sure to use the adjustable rate mortgage calculator to measure the payments and loan amount.

If you decide to investigate refinancing, contact your current lender to see if you can negotiate with them to waive some of the closing costs.  Market conditions may drive lenders to accommodate you on this or other aspects of a new loan agreement.  If this approach isn’t viable with your lender, you can contact other lenders for current mortgage rate information.  However, the best way to search for and compare mortgages is to do visit one of the many web sites that offer this service.  And always be prepared and come armed with an assortment of mortgage calculators to get hold of the best mortgage with best mortgage rate when the rates are moving in your favor.

Tags: 30 year fixed rate mortgage, adjustable rate mortgage, adjustable rate mortgage calculator, fixed rate mortgages, home equity loan, mortgage calculator, mortgage payment calculator, mortgage rates

This entry was posted on Thursday, February 19th, 2009 at 8:30 pm and is filed under Mortgage Articles. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.