The end of March 2010, the Federal Reserve will stop buying mortgage backed securities and from that point on, mortgage interest rate will move up nearing 6% until the end of the year. Currently interest rate on a 30-year fixed US mortgage is 4.95%. Some homeowners wait and “gamble”, hoping for the interest rate to go down again, but after March, is not not likely to happen. When mortgage rates are above 6% chances are that the refinance market is going to die. It doesn’t take a genius to predict its death – who would want to refinance when the rates are high or higher than your current mortgage rate?

This means that the now is probably the only best time to get a fixed low interest rate. However, before you do that there are a few things to consider in order to determine whether refinancing your mortgage is even worth it.

How much lower is your interest rate going to be?

If your interest rate is going to be less than 1% lower, it may not be worth it to refinance. Depending on other factors, such as closing fees and others, you might end up paying just as much or even higher than before.

How much will the monthly payment be?

If your monthly payment is not going to be much lower than before, why even bother?

How long is the new loan term?

This is a very important question you should ask your lender. If your current loan has 25 years left or even shorter, and you are thinking of refinancing, you will have to start up with another 30 year loan. The best deal would be if you have 25 years left and are refinancing to a 15-year mortgage, then it is worth the shot.

How much does it cost to refinance?

Some lenders may charge a lot of money for closing. Sometimes it is so much that you will need years to finally pay off the costs of your mortgage refinance with your savings.

The best decision whether to refinance or not is by going through these questions first and weigh on the answers. You may get a lower monthly payment but the new loan is going to add years of payments. Or you may get a lower interest but the closing fees are so high that at the end of the loan term you find out that you have paid more than you would have paid if you hadn’t refinanced your mortgage.

To find the lowest costs on a refinance shop around and compare between lenders. You may want to search the internet first and then talk to at least four or maybe five types of lenders, which are credit union, big lenders such as Wells Fargo or Bank of America, your local mortgage broker, an online lender such as ING Direct and your local bank.

Before talking to them, make sure that your credit score is at least 660 because if it isn’t you will not qualify. Once you have cleaned up your credit score, make sure your lenders know that before you ask them questions.

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