Low Mortgage Rates Produce Enticing Refinance Offers

In 2010, interest rates for mortgage loans hit a record low. Since then, we have seen the rates hover around some of the lowest rates in 50 years.  For the past five weeks, interest rates have been dropping and have hit the lowest of the 2011 calendar year. These rates have nudged hesitant Americans back into the housing market. Consumer confidence in the market is recovering, but the market for new home continues to suffer. More people are considering refinancing their existing home loan, with rates that are lower than ever.

What’s the big deal?

It is no secret that most people are quiet about the fact they have considered refinancing their home loan, and for good reason. Refinancing your mortgage loan creates a new mortgage loan and will cost you additional fees. Many lenders are offering “no cost” refinancing options, which mislead borrowers into thinking they won’t be charged any fees. Although, you may not pay any upfront or “out of pocket” costs, the fees are almost always added into the principal of the new loan.  Many people assume refinancing only changes the conditions of their existing mortgage loan when, in fact, it creates a new loan that is subject to inspection, appraisal and closing costs.

In addition to added fees and costs, refinancing is often not an option for borrowers who have been struggling to make their mortgage payments for a while. Defaulted payments, a lack of qualifying income and declining property values can prevent you from refinancing your home.  Anyone facing financial hardships that threaten their home ownership through foreclosure should contact their lender immediately to discuss options. Often, lenders are willing to negotiate changes in the terms of your existing mortgage  loan through loan modification programs.