In case you haven't noticed, mortgage interest rates are falling. Down, down, down they go. Where they'll stop nobody knows. There is one thing you should know, though. If you have had a first and second mortgage for more than a couple of years, you probably stand to make, or at least save a good buck by refinancing in the near future.

Also, if you have a variable interest rate mortgage, the time has drawn near to get a fixed rate and be done with it. To hold on to a variable rate mortgage much longer would be like playing Russian roulette with your financial future.

Let's go through some examples of how falling interest rates can help you save money long and short term. Then let's see if we can determine whether or not you've ridden that old ARM (Adjustable Rate Mortgage) long enough.

Refinancing To Get a Better Mortgage

In our first scenario, Henry has only a first mortgage. His mortgage is a 30 year for $170,000 at 7.75%. . His monthly mortgage payment for his interest and principal is $1,432.82. He also pays escrow to the tune of another $310 monthly. This escrow account is used to pay his home owners' insurance and property taxes, but this will not be affected by a refinance. He also has a car green trust cash tribal installment loans bad credit for $19,000 at 7.25% for 5 years. This payment is $378.47 per month.

Henry is most unusual; he was able to pay off all his credit card debt with his last refinance and hasn't accumulated an appreciable amount of credit card debt since. So, Henry's total monthly obligation before the refinance was $1,811.29. He was able to refinance at 5%. He had enough equity in his home to get a 30 year first mortgage for $200,000. Now, his monthly payment for his principal and interest will be $1,073.64. He will still be paying the same amount for his escrow payment, but his car will be paid in full by his refinance cash back. So, Henry will save more than $737 a month.

Henry had refinanced his home 5 years ago. For this current refinance, the property appraised at $224,900, which was just a little less than it appraised at the time of his previous refinance. Back then, Henry's salary and credit rating only made it possible for him to borrow 75% of the home's appraised value. Now Henry's credit rating is good, and though his salary didn't increase by much, he easily qualified for a 90% loan to value refinance due, in part, to the low interest rate.

To pay his old mortgage in full would have required Henry pay a total of $515,815.20 over the course of 30 years. His car would have cost him approximately $23,000. His new mortgage will cost a total of $386,510.40. On top of that, Henry took home over $13,000 from the closing after paying his closing costs of $6,500.

So, Henry left the closing a happy and financially well-adjusted man. In his mind, Henry is now certain some lucky woman will find him and simply beg him to be part of her happily ever after.

Refinancing To Lower Your Monthly Payment

In scenario number 2, Norm and Peg hadn't refinanced their home in 17 years. Originally, this house was a fixer-upper Norm and Peg purchased for $100,000. Though, like everyone else's home, their home dropped in value during the last couple of years, it still appraises at $250,000.

Norm and Peg applied for and were approved for a 30 year $200,000 first mortgage at 4.75%. Norm was amazed at both the low interest rate they received and the fact at 63 years old he was approved for a 30 year mortgage. Actually, it isn't unusual to be approved for 30 years at 63 and Norm and Peg's credit rating, though not excellent, was good enough to be approved for an 80% green trust cash bad credit direct lenders only to appraised value refinance.

Norm and Peg's finances were in a disheveled condition. Though their first mortgage rate was 9% and the principal owed was $50,000, they had a second mortgage on which they also owed approximately $50,000. This interest rate was variable and though it had been much higher, in recent months it was 5.50%. They had a purchased a car on which they still owed $5,500 and were paying 8.5%. Their worse problem was they had high interest credit card debt of $40,000.

Their second mortgage was a home equity line, which was interest only, so the principal was not being paid down at all. Not only was this making for an unstable financial situation, but Norm and Peg were paying more on their credit cards some months than others, This made their payment schedule difficult to figure out.

We do know however, their first mortgage payment obligation for principal and interest was $804.62. Their s home equity line of credit payment was $229.17 monthly. Their car payment was $266.71. Last, but not least, their monthly payment due on their credit cards, as far as anybody could discern, was $1,100. This was true if no late payments were assessed on these cards. So, Norm and Peg's total monthly obligation was just about $2,400.

Now, their new mortgage takes care of all their previous obligations with a monthly payment due of just $1,043.29! It is impossible to see how much Norm and Peg will save over the lifetime of the green trust cash native tribal installment loans. Their total savings would actually be immeasurable; even though Norm is convinced he won't be around to see the end of this mortgage.

Their first mortgage and their car were well on the way to being paid in full, but there is no way to calculate the total savings this refinance brings because their home equity line of credit and their credit cards would never be paid in full at the rate Norm and Peg were paying them! However, the monthly savings and the overall savings this refinance resulted in were tremendous!

After the closing, Norm and Peg celebrated by throwing a huge party. The beer, which Norm supplied, flowed all night long! You might want to note one of Norm's most honored guests was his father, Norm Sr.

Refinancing To Lock In a Fixed Rate

Our last scenario involves a man I know very well. In this article I will protect his identity by referring to him as Ingots. Ingots had an adjustable rate mortgage for over 20 years. His original introductory rate, which is always much lower than the market rate, was 5.875%. At the closing, a lawyer joked to Ingots, "Boy! You'll never see a rate that low again!" Ingots replied, "oh yes, I will!" Ingots was right. In fact, more than half the term of the mortgage saw its interest rate below 5.875%.

About 2 years ago a mortgage broker offered Ingots a 30 year fixed rate mortgage at 7.75% and told Ingots he better lock in this excellent rate while it is still available. Ingots called the broker an idiot and slammed down the phone is his ear. In short, Ingots loves his adjustable rate mortgage!

Now, Ingots has proclaimed he will refinance his house and lock in a fixed rate when the interest rates fall to 3.75%. For sure, I reluctantly must say Ingots has been right on the money for the last 20 years on interest rates. Now, let's see if he might be pushing it a bit too far.

Ingots has great credit. He will get the most favorable rate available. On top of this fact, he is looking for a 15 year mortgage and this type of mortgage usually has a more favorable rate than a 30 year mortgage. Right now, Ingots could cop a rate of 4.625% on a 15 year, $200,000 mortgage. This would make his monthly payment $1,542.79. If Ingots' dream comes true and sometime in the future he finds a rate of 3.75%, his payment would be $1,454.44; a savings of $100 a month over what he could lock in now.

Here's the problem; what if this is finally, the bottom? A lot of very smart economists are predicting a high rate of inflation is on the way. Without changing the topic of this article, I would have to say it is only logical that today's monetary policies are causing inflation to stir. This coming inflation could become oppressive! Suppose Ingots waits as he sees mortgage rates hit 7%? When that happens, they are not coming back down, at last for a good long while.

At 6%, Ingots would pay $1,687.71 each month for his 15 year mortgage. At 7%, the payment would be $1,797.66. At 12%, he would be paying the amount Norm and Peg just got through paying; $2,400! My advice to Ingots is not to wait too long.

The big story in real estate over the last couple of years is the fact housing prices have fallen. When this happens, people lose equity in their homes and are unable to refinance for the purpose of getting money at the closing. However, as we have seen in the scenarios in this article, there are many cases where a refinance is a Godsend. Certainly, if you have any kind of a mortgage other than a fixed rate, it is time to refinance your way out of it.