Because the Fed has repeatedly slashed federal rates over the past several rates, mortgage interest rates are the lowest they have been in years. While Federal rates do not directly impact mortgage interest rates, over time, mortgage rates tend to follow the same trends … upwards or downwards.

When you consider whether a refinance is right for you, here are a few questions to take into account:

* Will the extra fees wipe out the money you would save with a lower interest rate? A refinance may bring with it a number of fees. If the difference between your previous interest rate and the new interest rate is small, you may discover that the money you spend on fees exceeds your potential savings.

* In the same vein, does the new mortgage you are considering offer a longer term that will add extra interest payments to your final bill? If so, the added interest payments may offset any savings from the refinance, even if the interest rate itself is lower. Often, when people refinance because they want lower monthly payments, the bank offers them a mortgage loan with a lower interest rate as well as a longer term. The result is a temptingly low monthly payment. However, the extended term also allows more interest to accrue. Use a loan calculator to determine whether you are really saving money, and if you are not, either decide to pay more than the minimum each month, or do not refinance.

* Refinance with a fixed rate mortgage, not a variable rate mortgage. Variable rate mortgages generally offer lower monthly payments than fixed rate mortgages, but you are likely to lose the benefits of the low interest rate when the economy booms and Federal interest rates rise again.

* Do not waste time waiting for interest rates to drop even lower before you refinance! Interest rates are reaching record lows already. If you wait to refinance, you may find yourself caught in a tide of rising rates. If you do find that rates have started to rise already, catch them when they are still relatively low. Refinance as soon as possible, and get a rate that is low enough to satisfy you, rather than wasting time holding out for an even lower rate that might never happen.

Even a weak economy has its bright side. If you weigh your options carefully, you can take advantage of the current economic situation, and refinance your house at considerable savings to you.

* Interest rates throughout the real estate market are going up. They were low throughout the first half of 2009, but appear to be rising starting in July. Interest rates are unlikely to dip any farther and are likely to keep going up, so if you want a low interest mortgage, now is the time to act.

* It is an excellent time for a fixed rate mortgage. Although fixed rate mortgages typically have interest rates a little higher than comparable variable rate loans, the extra percentage points are worth it for the chance to lock in the prevailing low rates.

* If you don’t want to wait for 2%, 1% may be more than low enough. The traditional advice is to not refinance unless mortgage interest rates are at least 2% below the interest rate on your current mortgage. However, some experts now think lowering your interest by 1% may be a good enough reason to refinance. Use a mortgage calculator to work out whether you would save if you refinance mortgages at the going interest rate, even if the rate is less than 2% under your current rate.

* Beware predatory lenders. Lenders with unethical business practices are more common than ever before because the credit crunch has produced a bumper crop of homeowners and would be homeowners who are desperate for any mortgage for which they can qualify. Refuse any mortgage whose fees total more than 1% of the amount of the loan, or which has a yield spread premium. Also beware lenders who advertise aggressively, recommend offsetting higher interest rates by frequent reselling or refinancing, or use high pressure tactics to make you sign. If you refinance mortgages through them, you can be assured of an expensive mortgage that will be a millstone around your neck for years to come.

If you have been thinking that it’s time to refinance mortgage loans, you’re right. Rates are about as low as they can go and are going to rise in the near future, and legitimate lenders are eager to lend to creditors with good credit ratings. If you have high interest loans from the boom of the last several years, now is a perfect time to refinance mortgage loans and lower your bills.

* Aggressive marketing. Borrowers seek out good home mortgage lenders; legitimate and reputable lenders do not need to hunt down borrowers. Predatory mortgages, on the other hand, are what one expert called “loans seeking consumers.” Predatory lenders use hard sell tactics, junk mail campaigns, and telemarketing, and even more suspiciously, they market door to door. Avoid any lender who uses these marketing tactics.

* High interest rates. Interest rates on bad mortgages are usually markedly higher than the market average. Some lenders target borrowers with poor credit ratings, since such borrowers have difficulty getting a home mortgage from a legitimate lender and are more likely to accept a high interest rate. Other lenders prefer to target inexperienced borrowers who are unaware that they are paying too much for their mortgage. Bad lenders often tell borrowers to handle the high interest rate by frequent “flipping,” or refinancing, of the home mortgage.

* Bloated fees. Legitimate mortgage fees might look staggering on paper, but they don’t come to more than 1% of the amount of the mortgage. Predatory mortgages usually saddle borrowers with fees of 5% or more.

* A kickbacks known as a yield spread premium. This is a well disguised piece of financial jargon for a kickback to the broker for convincing you to accept a much higher interest rate than you are entitled to. A legitimate loan will never have a yield spread premium on any account. If you are offered a home mortgage with a yield spread premium, look elsewhere. Not only have you been offered a bad mortgage, but you have been told indirectly that you are qualified to get a much better interest rate.

* Prepayment penalties. This is a fee you will pay if you want to pay off or refinance the loan early. Good mortgages rarely have any prepayment penalty, and when they do have a penalty, the term during which the penalty applies is short. However, bad mortgage lenders frequently dissuade you from refinancing with another lender by tacking on prepayment penalties that apply for three years or more after you sign for the mortgage.

If any of these signs apply to a mortgage you are offered, reject the offer and find another lender. No matter how badly you need a home mortgage, you don’t need one as bad as the ones these lenders will sell you.

The first clue that it is time to refinance mortgage loans is that interest rates have dropped at least two percentage points below what you are currently paying. This difference between interest rates is large enough that it is likely to make up for what you will need to pay in refinancing fees. However, you may find that the formula does not fit your situation. If you do not stay in the house long enough for the savings from the lower interest to equal the refinancing fees you paid, you will actually lose money from the refinance.

Another reason to refinance mortgage loans is to get a lower monthly payment. If you are strapped for cash, being able to put less of your earnings into your mortgage can significantly ease your budget. You can lower your mortgage payments by refinancing to a mortgage with a longer term, which means a higher total bill but a smaller monthly bill. Or, if you plan to sell your house within the next few years, you can get even lower monthly rates with a non amortizing loan. When you refinance mortgage loans with a non amortizing loan, you pay only the interest on the loan for a grace period of several years. When the grace period ends, you are responsible for paying the principal off on an accelerated schedule, or even in one lump sum. However, if you sell or refinance the house before the end of the grace period, you get the benefit of lower monthly payments, and repay the balance of the loan with the proceeds from selling or refinancing the house.

If your analysis tells you it’s time to refinance, mortgage interest rates are ideal. On the other hand, your personal situation may not make refinancing a sound choice right now. In that case, wait to refinance; mortgage rates will dip again. Either way, rely upon your sense of your own financial situation, not outsiders’ opinions or articles in the paper, to decide when you should refinance.

The interest rate on an adjustable rate mortgage (ARM) lowers and rises in tandem with fluctuations in the state of the economy. Your home mortgage’s interest rate rises if the prime interest rate rises, and falls if the prime interest rate falls. This lets you get the maximum benefit from periods of low interest, but also means that if the prime interest rate rises sharply, your interest rate and monthly payments will rise with it. Because the risk of rising or falling prime interest rates rests on you, not on the bank, banks offer lower introductory interest rates on adjustable rate mortgage loans than on fixed rate mortgages.

The interest rate on a fixed rate home mortgage does not change over the term of the loan; it is set, or fixed. This cushions you from the shock of skyrocketing interest rates, but also prevents you from taking advantage of falling interest rates. Banks assume that at least once, the prime interest rate will spike above the interest rate of your fixed rate mortgage and the bank will have to pay the difference itself. Because banks must budget for this eventuality, they offer higher interest rates on fixed rate mortgage loans than on adjustable rate mortgages.

A convertible home mortgage loan begins as an adjustable rate loan, but you have a period of time during which you are allowed to convert to a fixed rate. This is a good choice of loan if interest rates are currently high, but you foresee a drop in rates. You can take advantage of the lower interest rate of an adjustable rate home mortgage when interest rates are high, then lock in a better interest rate for the life of the loan as soon as rates drop.

A balloon home mortgage begins with an introductory period during which you pay a fixed rate, but rather than paying the usual high interest rate for a fixed rate loan, you pay an interest rate almost as low as that for an adjustable rate mortgage loan. However, when the introductory period ends, you owe the total unpaid balance of the loan. Balloon loans are excellent for people who intend to renovate and resell a property before the introductory period ends, or who foresee being able to refinance at favorable rates within the next few years.

If you wish to refinance, shop around online to determine the interest rates and types of mortgage loans for which you might be eligible. Next, do the math to determine if a refinance is the right thing for your financial plan and budget. The most common reason for refinancing is to bring down the payments on mortgage loans. Calculate what the monthly savings would be for you by subtracting the estimated monthly payment under the new rate from your current payment. You will then need to calculate what the actual refinance will total. For example, you will need to pay for an appraisal, fees for the title and lawyer fees. The next step is to figure out your “break even point,” or when you will actually start saving each month. You do this by dividing your total estimated cost for the refinancing by your estimated monthly savings. The number will be given in months. If you expect to sell the house before you break even, refinancing might not be the best financial move. If you expect to sell the house sometime after you break even, refinancing would probably be beneficial. If the calculations indicate savings for you, then you too could benefit from one of the new low interest rate mortgage loans.

* Refresh your understanding of the market. If you took out your first mortgage quite a while ago, you may not be aware of the new kinds of mortgages available to lenders who want to refinance in today’s market. And if you took out your mortgage two or three years ago, during the boom, you may not be aware of the changes the credit crunch has brought to the mortgage industry.

* Don’t be in a hurry. Trying to refinance quickly opens you to predation by lenders who will be quite happy to give you a lovely new mortgage right away… at a price. Take your time and learn who the reputable mortgage lenders are.

* Timing is key. Taking advantage ofmarket fluctuations like the low interest rates prevalent in June 2009 is essential to a good refinance. So is your personal timing: How much can you afford to put down right now? How much longer do you plan to keep the house? Would waiting another few months put you in a stronger financial position for a refinance, or are conditions for refinancing optimal right away?

* Consider new options. The market is flush with new mortgage types. You may find that a nontraditional mortgage, like a balloon mortgage, is the ideal kind of mortgage for your refinance.

* Learn the danger signs. Refinance fees that add up to more than 1% of the total mortgage, yield spread premiums, and restrictions on when you can repay or refinance are all warning signs that you have been offered a bad mortgage. So are several other easy to spot signs. Leanr what they are and how to cut through the jargon to see them, and radically improve your chances of getting a good mortgage.

* Decide which you want more: low monthly payments, or a low total payment. You can’t have both. On the other hand, if you know what you need, you can get a great deal on one.

* Do all the math beforehand. Find a mortgage calculator online and play with the numbers so you understand how each variable in the refinance affects all the others. For instance, doubling the loan term for the refinance does not halve the monthly payments, but a small drop in the interest rate creates an impressive change in the final amount you will pay, thanks to the power of compounding.

As you research before your refinance, keep these tips in mind. A little preparation beforehand will make certain that all the surprises in your refinance are good ones.

There are a variety of good reasons to refinance your mortgage. The most obvious of these is to obtain a more favorable interest rate, particularly when the current mortgage has an adjustable interest rate that is about to reset. Other homeowners refinance a mortgage to access their home equity in order to finance home improvements or pay down debt. The homeowner benefits from this financial strategy at income tax time as mortgage interest is deductible, whereas interest on consumer loans (like credit card debt and home improvement loans) is not.

There are some homeowners who refinance a mortgage solely to shorten the repayment period. Monthly payments will rise, but the overall interest paid over the life of the loan will be less and the loan will be paid off sooner. Regardless of the motivation behind your decision to refinance your mortgage, you should do some preliminary investigation into available mortgage products so that you understand exactly what you will be responsible for.

You should also seriously consider how long you plan to remain in your current home as part of your decision process. It typically takes about two years before you completely recoup your closing costs from the savings. Refinancing your mortgage only to turn around and sell the home shortly thereafter does not make good financial sense.

The process remains the same whether you refinance a mortgage or take out a new loan. You must still pay loan closing costs such as application fees, title update and review charges, title insurance premiums, document processing fees, discount points, appraisal fees, attorney fees and county clerk filing and recording fees. These costs can either be paid upfront or added to the mortgage.

So long as you completely understand the terms of your loan and you intend to stay in your home long enough to recoup your closing costs, refinancing your mortgage can be one of the best financial moves you will every make.

Refinancing a mortgage is a very personal decision and requires that you know your financial plan and budget. The savings that can be gained each month on mortgage payments is a common reason people refinance. Mortgage refinancing can be a financial win if the savings makes sense with the length of time you plan to own the house. Your first step is to figure out how much you would save each month under the new interest rate. Second, estimate the cost of the appraisal, lawyer fees, documentation preparation and filing fees, charges from the new and old lenders, and any other refinancing costs. Third, divide the total cost of the refinancing by the estimated monthly savings. That will let you know when your “break even” point is, or how long it will take for you to actually start saving as a result of the refinance. Mortgage refinancing should be considered, if you plan to own the property beyond the break even point of the refinance. Mortgage holders whose adjustable rate mortgage will reset soon, may choose to refinance with a fixed rate mortgage, regardless of the break even point. The peace of mind offered by a fixed rate mortgage during economic uncertainty may alone be worth the refinance. Mortgage holders can also consolidate a higher interest loan or credit card debt with their refinance. Mortgage refinancing with a low fixed rate will usually tender lower interest rates than those of credit cards.

To determine the benefits of a refinance, mortgage owners need to confidently know what they can afford and what is best for their current and future budgets. Make sure to calculate the savings against the costs of the refinancing and the duration you expect to own the home. Educate yourself on all the options and be aware of all the terms and rates set forth by any new mortgage you take on.

Many people who currently own properties would like to lock in the low rates and refinance their mortgage loans. The past week had the most applicants for mortgage loans in half a decade. About 80 percent of those applications were for refinancing. Unfortunately, a fair number of those who applied were denied. One mortgage lender in South Florida said that only about 5 of the 50 customers who called about refinancing recently qualified. Many markets across the country have homeowners who now have larger mortgage loans than the values of their properties, due to the drop in home values. Banks will not approve homeowners who do not have enough equity. To be eligible for refinancing, a consumer must now have an excellent credit score, own at least 20 percent equity in the home and have a low percentage of debt. This is in stark contrast to the lending standards for mortgage loans of just a few years ago.

Many refer to the previous loose lending standards as the wild west. Those standards often required little or no down payments for mortgage loans and appeared to disregard the credit worthiness of many applicants. Although the new lending standards may be compounding the already suffering real estate market, they will offer a necessary correction for a credit market that appeared to be out of control. We will have to wait and see if the new year will offer a renewed confidence in the credit market, and ample encouragement for consumers to take on new mortgage loans to get the ailing real estate market going again.