The recent economic downfall across the world can be seen as mainly effects from the subprime mortgage market. A subprime mortgage is lent to someone who does not qualify for the loan such as someone with less than stellar credit or insufficient income. Subprime mortgage loans given by commercial banks across the world like Bank of America, Bank of England and others have created this disaster in the world wide economy giving birth to the biggest recession in our history. Banks tried to safeguard loans by setting a higher rate of interest as well as apply adjustable rates that increase with time. Consequently, the failure to pay back by defaulters has resulted in this greatest downturn.
The recent downturn is also making things impossible for home owners to make their monthly mortgage payments. People are filing bankruptcy as they are unable to repay their loans with such high rates of interest. One of the best ways to help bring the market back to a stable position can be mortgage refinance. As a result, various organizations have started providing opportunities for lowest interest rate loans for those who are willing to refinance their existing mortgage.
Economic Doom and Low Mortgage Rates
The Federal government has reported that the current average mortgage rate has been brought down to 4.85 percent from its average of 5.72 percent in mid 2009. This shows that by refinancing in this current situation, a person can save up to $30,000 on a mortgage of $249,000 and also pay it five years earlier than the estimated time. Fred Glick, managing member of US Loans Mortgage is of the opinion that if you can save on the interest you are paying, then it is time to think about refinancing your mortgage. Mortgage rates falling below the historical rates have resulted in reducing the cost of borrowing.
Lowering Monthly Payments
When people refinance their mortgages they can lower their monthly payments. Also they can pay off their mortgage in a shorter amount of time. When you convert an ARM or adjustable rate mortgage to a fixed rate loan, you have the opportunity to lock in at a lower interest rate which is even more important during these indecisive economic times. The current economic condition has also made it possible to lower your fixed rate mortgage payment. Refinancing during this time can give you more money to live on and can save thousands of hard earned of dollars over the life of your loan.
Current Economy and Gimmick of Refinancing
Many mortgage lenders across the country are now busy advertising low mortgage rates and also the packages they are offering on mortgage refinancing. This also includes the ‘no closing cost’ option. Before you go consider signing with your mortgage lender just make sure that there are no hidden costs associated with the loan. ‘No closing cost’ does not mean that you need not pay the processing fee, filing fee and other related costs. It is a mere advertising device employed by the mortgage lending companies to attract customers.