Mortgage rates will go up this year.  (yes, a bold statement)

The government has been tapering off the purchase of mortgage backed securities and will finish at the end of the first quarter of 2010.  We all know that since the government started to purchase mortgage backed securities back in early 2009,the mortgage rates first dropped, and stayed, in the low 5 percent’s/upper 4 percent’s.

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Even today, we are still at historic low mortgage rates, but this party will come to an end.  Probably faster than most of us are even anticipating.  The only question that remains is, “How much will the mortgage rates rise?”, not “if” they are going to rise.

It’s extremely hard to say how investors will react to the sudden stop of the government’s actions, but the inevitable of mortgage rates rising will happen.

If you are considering a mortgage refinance into a lower rate, now is the best, and probably the only, time to lock in those historic low mortgage rates.

Read more about mortgage rates at:  History of the mortgage rates.

Here is a direct link to a great chart that shows the history of the mortgage rates:  http://www.mortgagenewsdaily.com/mortgage_rates/charts.asp

Amazing how they go up and down, hey?

You can go directly to Mortgage News Daily to adjust the chart to see the history of the mortgage rates for other years.

What’s important to understand when looking at the history trend of the mortgage rates, they usually go up, then back down.  Go down, then back up.  It’s quite the roller coaster ride and if you don’t normally follow them, it can cause a lot of confusion.

One of the easiest rule of thumbs to follow when it comes time to decided when to lock in that low interst rate, is to focus on your personal goal.

Are you looking to lower your monthly payment as low as possible?
Are you looking to save the most amount of interest over the life of the mortgage loan?

When is comes to refinancing your mortgage loan, most people will focus on the amount of monthly savings they can accumulate from the refinance.  This is mostly because we live our lives month to month, when it comes to our bills.  If you are looking to save $100 a month on your mortgage payment with your refinance, you should really think about locking your rate when that $100 savings is there.  Don’t let greed overcome you, lock in that interest rate when you reach your goal of a $100 monthly savings.

Same goes for the goal of saving the most amount of interest possible when refinancing your mortgage.  If your goal is to reduce your rate just 0.5% and this saves you tens of thousands over the life of the mortgage loan, then lock your rate in at 0.5% less than your current mortgage rate.

Every situation is different, because a person with a $100,000 mortgage loan may not refinance to save just 0.5% on their rate, versus the person with a $400,000 mortgage loan.  The savings in interest is dramatically different!

I know looking at the history of the mortgage rates will not give you the crystal ball of when to lock in the low rate, but it certainly helps in making the decision.

The ups and the downs…the ups and the down!

The mortgage rates continue on their typical roller coaster ride over the last few weeks.  At one point, we saw lenders at 4.5% on a 30 year fixed rate, then about a week ago the 30 year fixed rate was at 5.5%.  What a difference that can make on your mortgage payment!

Some of the best advice you will read about refinancing your mortgage will talk about lowering the interest rate.  Yes, low interest rates are what you should focus on, but don’t forget the many factors that should go into figuring out if a refinance benefits your situation.

What to focus on when looking to refinance.

Most of us live our lives month to month.  Why?  Our bills are due once a month and bills are a major part of our everyday life.  Because of this, most people just focus on the new monthly payment the mortgage refinance will give them.  There are other things you need to factor into your decision on whether or not you are going to refinance.

Here they are:

The amount of interest you will be saving over the life of the loan.

It’s a beautiful thing to be able to save $100 dollars a month on your mortgage payment.  That’s $1200 per year!  That’s a pretty nice savings.  Now, the amount of interest you will save over that first year will be in the thousands!  Tens of thousands over the many years you will have the loan.

Here is a good example of how much interest you can save with a refinance.

The amount of years you could reduce from the mortgage term.

This is something most people don’t even realize when they go to refinance their mortgage loan.  Some lenders will be able to put you in a 25 or 20 year mortgage loan and the interest rate is about the same.

For example, on a 150k mortgage at 5.5% on a 30 year, the payment would be $1135.58 (just principal and interest).  On a 25 year loan with the same terms, the payment is $1228.17.  That difference is only $92.59 per month!

Most of us won’t even consider refinancing the mortgage without saving $100 per month, so if you don’t need the savings, then reduce your term by 5 years.  You’ll be 5 years closer to the American Dream…owning a home free and clear!

 The amount of closing costs vs the interest rate.

Most lenders will be able to offer you higher closing costs for a lower interest rate.  Sometimes you can take a higher rate in exchange for lower closing costs.  You should take the time to look into paying more costs for a lower interest rate. 

If you have some equity in your home, you can even include those extra costs into the loan, so you don’t have to come out of pocket for those extra costs.  Take the time to figure out the amount of interest you will be saving, because if you are going to be in the home for the next 10 years or more, it could make a lot of sense to pay for a lower interest rate.  Here is a post that goes over an example on the amount of interest saved with a lower interest rate.

When looking at refinancing your mortgage, keep in mind that there are multiple factors when looking at the benefits of your refinance.

Don’t forget to check your credit report before applying for the refinance!