Refinance Mortgage Rate
When you refinance, your mortgage rate will likely become a key concern. As you refinance, you may start paying more attention to federal funds rates on the news. These rates are the interest rates at which banks lend money to each other. This is a "short-term" rate. When you refinance your mortgage, however, you are dealing with a "long-term" rate, since mortgages can last up to thirty years of even longer. Your mortgage rate, although long-term, can be affected by short-term rates, a fact you need to be aware of when you opt to refinance. When short-term rates plummet, lending and borrowing skyrocket, resulting in inflation. When people start getting worried about inflation, long-term rates - including your mortgage rate - increase. Mortgage rates are set each day in public markets and are therefore usually ahead of Federal Reserve rates. In plan language, that means you will see a difference in mortgage rates before you see a difference in the Federal Reserve rates in many cases. Once markets anticipate a slowing of the economy, interest rates - including your mortgage rate - start to fall as the markets anticipate that the Federal Reserve may lower short-term rates. When you refinance, you may find that mortgage rates fall before the Federal Reserve does anything. What this means for you is that you need to watch mortgage rates and worry less about Federal Reserve rates if you are planning to refinance. The mortgage rate, especially in relation to the Federal Reserve rate, is obviously a complex creature. Many people who wish to refinance talk a lot about their mortgage rate without really understanding what a mortgage rate is and how it fits into the economy. Understanding these simple concepts can help you make the right decision about your mortgage rate when it is time for you to refinance. Most of all, understanding the basics should show you that when you are ready to refinance, you should not try to predict the entire future of the economy. Rather, you should look at your current mortgage rate and at the mortgage rate you will get through a refinance. You should also look at the costs associated with a refinance. If the costs and time of your refinance will cost you more than a new mortgage rate will save, a refinance is likely not your best bet - no matter what the Federal Reserve happens to be doing.