Mortgage Rates By Bob D. Till At Isnare.com Ezine Articles

Mortgage, what’s best?

In most countries, a home is valued as an asset rather than a liability. Normally people of these countries bought homes using a mortgage as a way to finance the purchase since most do not have enough savings to fund a purchase outright. In good financial times this strategy worked well, but with the current financial crisis, getting a mortgages became a problem for most people who do not have excellent credit.

A mortgage is defined by Wikipedia as “the transfer of an interest in property (or the equivalent in law - a charge) to a lender as a security for a debt - usually a loan of money. While a mortgage in itself is not a debt, it is the lender's security for a debt. It is a transfer of an interest in land (or the equivalent) from the owner to the mortgage lender, on the condition that this interest will be returned to the owner when the terms of the mortgage have been satisfied or performed.”

In exchange of the cash provided, the borrower will be paying the lender an annual interest rate known as annual percentage rate or APR. Due to the large number of defaults in mortgage payments, the country in an economic recession and the government purchases mortgage backed securities mortgage rates have been going down.

In fact the Mortgage Bankers Associations or MBA have released information that the mortgage applications have increased by 48% this December 19, 2008 and the refinance index increased by a whooping 62%.

The average contract interest rate for a 30 year fixed-rate mortgage went down to 5.04% from 5.18%. For 15 year fixed-rate mortgage, the average contract interest rate decreased to 4.91%. While the average contract interest rate for 1 year is now only 6.36%.

These low mortgage rates can save you thousands of dollars in the entire duration of the mortgage. If you are pretty short on cash and want to save every penny but at the same time need to keep your home, now is the perfect time to have your mortgage refinanced. Doing so, you can start saving on your mortgage payments.

However, keep in mind this general rule when refinancing: if you can get a mortgage rate of 1% lower than your existing mortgage then you have a good deal in your hands.

Mortgage refinancing means using your existing home to lessen the amount paid to your APR without extending additional cash. Mortgage refinancing if considered wisely and with the correct information may lead to substantial savings. You can think that the 1% difference as savings already.

There are a few things to take into account before applying for mortgage refinancing. With the financial crisis, the requirements have become more stringent.

To know if you can qualify, consider the three points below.

1. New mortgage rate is 1% less than the current.
2. Mortgage does not have more than 80% loan-to-value ratio or LTV.
3. You have a minimum credit score of 725.

If you meet all the above, then the best thing you can do with your mortgage is to have it refinanced. For more help you might need an online mortgage calculator so you can decide to go for refinance or not.

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