Michael Stockton

The FED announced last week that it would cut it’s overnight lending rate to .25%. This news alone was not necessarily a shock to the market, however in the words of the FED Chairman, Ben Bernanke, the FED would use every tool in its’ arsenal to help stimulate the economy.  One tool is the purchase of mortgage backed securities.  The FED’s announcement to continue to purchase mortgage backed securities caused the bond market to rise rapidly.  This alone will help to continue to drive down mortgage rates. 

Refinancing your mortgage is a big step, but how do you decide when to do it? Here some tips to help you decide when the time is right for you.

The rates are lower This is probably the first reason people decide to refinance because it results in lower monthly payments. Generally, if rates drop 1 percent or more - it’s a good time to refinance.

You need extra money Need to pay college tuition or a high interest credit card? Because refinancing results in lower payments, the money you save can be spent elsewhere.

You want to reduce the term of your loan Many people refinance to save money over the life of their loan. For example, if you currently have a 30-year loan and you refinance to a 15-year loan, after you refinance you may have higher monthly payments but you will pay off your loan quicker.

You want to convert your adjustable loan to a fixed loan If the rates are lower than they were when you got your loan, switching to a fixed rate mortgage can offer more security and stability as well as save you money!

You want to consolidate debt Loans such as second mortgages, credit lines, student loans and credit cards can often be consolidated when you refinance. Plus, consolidating your debt can result in tax savings, since consumer loans are not tax deductible, but a mortgage loan is tax deductible.