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Low Interest Rates and how to maximize

Low Interest Rates and how to maximize

By: Tanya Torres

Interest rates have continued to rise for more than 40 years, however in 2012 the rates finally dropped from 18 percent to 3 percent. In the past 7 years, the interest rates have stayed low to where mortgage holders are paying as little as 3 percent in certain cases.

Recently, there has been talk of it increasing once more which would make it difficult for mortgage holders to keep up with the payment increase. Even a slight change in the rate can cost a lot in the long run. However, in the past week the average 30-year fixed-rate fell from 3.81 to 3.75. Last year the rate was at 4.54 while the 15-year fixed rate was at 3.87 and decreased last week to 3.18 percent. Lastly, the five-year adjustable rate average dropped to 3.47. 

By having these rates decrease, it makes it easier for new and current homeowners to take advantage of some savings with their mortgage payments. Not only does it offer a way to save money but there are a few ways to take advantage of these decreases no matter the loan period.

For current homeowners, refinancing your mortgage can definitely help reduce your payment especially if you’re planning on staying in your home longer. If you are thinking of it as a more of a short-term starter home then refinancing to a shorter fixed period is an ideal option for you. You can drop it from a 30 year loan to a 15 year loan. These loans typically have a shorter interest rate.

Before you start attempting to refinance your mortgage, it is best to check to see if you have the finances and good credit to be approved for refinancing. You also have to keep in mind that lenders will be considering your employment history, debt-to-income ratio and your FICO score just like they did when you first got your mortgage. Once you begin looking into refinance, you have to make sure that you’re financially ready to make this change. Banks will offer better rates for those who are low-risk customers which is why you will have to reduce your debt as much as possible before you begin.

Another reason to take advantage of the low interest rates right now is if you have private mortgage insurance (PMI). If your home value increased or is about to and you have at least 20 percent equity then refinancing will help remove the PMI monthly payments and reduce interest costs.

There are plenty of reasons why you need to take advantage of the low interest rates and many positives that come out of it. The most important is that refinancing your loans will only benefit you and your wallet which is why you need to get started right away before rates go up.

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Brian Burds

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