Mortgage interest rates have been rising and falling sporadically during the past 20 years. The movement of mortgage interest rates is inversely proportional to the status of the economy. As a general rule, mortgage interest rates are low when economy is good. When economy goes down, the feds would jack up mortgage interest rates in an effort to stimulate the economy.

Only last month, mortgage interest rates have jumped more than a point. This increase in mortgage interest rates has significantly reduced the number of people willing to refinance their homes.

According to experts, refinancing only makes sense if the mortgage interest rates are low. And with this recent rise of mortgage interest rates, it is only logical that people are balking at the idea of re-mortgages. The total increase of mortgage interest rates was over 6 per cent at the end of last week. Although this mortgage interest rate is the highest so far this year, it is still lower than where it was a year ago. Last year, the mortgage interest rates of 30-year fixed rate loans were averaging nearly 6.5 per cent.

To refinance or not to refinance?

It is understandable that some hesitation is at hand when it comes to refinancing, especially since it has been found that mortgage interest rates are rising. But still, it might not be too late to refinance. If you fall into one of these categories, the apparent rise of mortgage interest rates wont affect your refinancing plans one bit.

Try to look at your mortgage interest rate right now. Compare your current mortgage interest rate with todays mortgage interest rate. If you find that todays mortgage interest rate is one half lower than your current mortgage interest rate, then you should probably try to refinance. Remember that the limit to refinancing is having a mortgage interest rate that is at least of a percent lower. Mortgage interest rates higher than that is not worth the effort or the risk.

Aside from making comparisons with mortgage interest rates, you might also want to ask yourself how long you plan to keep your house. If your plan is to stay in your home for only five years or less, then refinancing by getting a fixed rate loan might be a good idea. This would allow you to save on your lowered mortgage rates.

Another option is to get an adjustable rate mortgage. If youre planning to stay in your home for much longer than five years and youre willing to risk having mortgage interest rates rise, then an adjustable rate mortgage will enable you lower down your mortgage interest rate. Adjustable rate mortgages usually have lower mortgage interest rates compared to fixed rates. After the end of the first year of your adjustable rate mortgage, your mortgage interest rates would depend on the rise or fall of prime rates. Its a risky business but it could allow you to save some if youre willing.

For example, the mortgage interest rate of 30-year fixed rate loans is about 6.2 per cent. Thats high but you can still save something since this is still a bit lower than last years mortgage interest rate of 6.5 per cent. However, if you get an adjustable rate mortgage, your savings are multiplied. An adjustable rate mortgage for five years has a mortgage interest rate of 4.5 per cent for the first year.

For most people, the biggest purchase they will ever make is their home. In fact though, their mortgage and the mortgage interest rates it connotes are a larger purchase than their home. In single loan term, the amount you pay to cover the mortgage interest rate cost is more often than not more than what you paid for your house. Reducing even a fraction of your mortgage interest rates can save you a great deal of money on your mortgage.

The rise and fall of mortgage interest rates have become erratic during the past 20 years. As a rule of thumb, mortgage interest rates go up when the economy is strong and stock prices rise. On the other hand, if economy weakens, mortgage interest rates go down.

In todays market, the mortgage interest rates are much lower than they were in the mid-1980s to the 90s. But within the next year or two, financial experts have come up with predictions mostly outlining the rise of mortgage interest rates.

A sad fact however, is that with mortgage interest rates, there are no certainties and no guarantees. No one can really tell whether or not mortgage interest rates will rise over a period of time. The current mortgage interest rate that you are charged right now is something that your banker or broker cannot control. Often, loans with unattractive mortgage interest rates are sold to FannieMae or FreddieMac which in turn, sell these loans to the secondary market.

Mortgage investors purchase these secondary market loans with mortgage interest rates that are undesirable to the regular homebuyer. These investors are actually the ones who set the standards in mortgage interest rates.

When news of a growing economy erupts, the Fed will raise the mortgage interest rates in an effort to slow down economic growth and lower stock prices. As a result, the investors would demand higher mortgage interest rates from their lenders. To sell their loans, lenders will increase their mortgage interest rate yields. This drives mortgage interest rates even higher.

When the economy goes down on the other hand, the same thing happens with mortgage interest rates, but in reverse. The Feds will cut down the mortgage interest rates in order to bring the economy back to life. Investors will start buying more bonds while the mortgage interest rates are low. Demand grows and loan sellers offer their products with lower mortgage interest rates. Thus consumers will be able to get loans for decreased mortgage interest rates.

Mortgage interest rates are based on a financial instrument called index. LIBOR (London Interbank Offered Rate) is among the most common indices that mortgage interest rates are based on. Other mortgage interest rate indices are 1-Year Treasury Security, Prime, 6-Month CD, and the 11th District Cost of Funds (COFI). These indices for mortgage interest rates are subject to the financial conditions of the market.

Loans are offered with different mortgage interest rates. Take for example a traditional 30-year mortgage. This type of loan involves a fixed mortgage interest rate. The mortgage interest rate of a 30-year mortgage is higher than that of a 15-year mortgage.

Other alternative programs and payment plans for your loans can some difference on your mortgage interest rate. An adjustable rate mortgage initially has lower mortgage interest rates compared to fixed rates.

So basically, the effect of economics on mortgage interest rates is also counteracted by the type of mortgage you choose to take.

Mortgage calculators are pivotal factors when youre looking for the right mortgage that best suits your home buying needs. Below is a short list of mortgage calculators to help you make your financial decision.

APR Mortgage Calculator

An APR mortgage calculator helps you calculate and compare the APRs or Annual Percentage Rates of different types of mortgage loans. To use an APR mortgage calculator, you need to fill in the loan amount and the quoted interest rate. Say for example, you take in a 30-year loan for 20,000 at 4.5% interest rate. Percentage of discount points is 2.0% with a closing fee of 1,000. When you calculate this using the APR mortgage calculator, youll find that the annual interest rate of this loan is 5.5275%.

ARM vs. Fixed Mortgage Calculator

Different financial situations require different types of mortgage. An adjustable rate mortgage is good when the loan term that you want is short. On the other hand, fixed rate mortgages might give you the certainty that you need when it looks like interest rates are rising. Use ARM vs. fixed rate mortgage calculators to find out which mortgage suits you. An ARM vs. fixed rate mortgage calculator would require you to fill in the details both mortgages. Once done, the mortgage calculator will help you determine how much you can save with either mortgage types.

For example, you decide to take out a loan of 105,000 payable in 30 years. The fixed rate mortgage interest rate is 7.5% while the ARM interest rate is 4% with an adjustable period of one year. Maximum cap period of the ARM loan is 0.5% while the lifetime cap is 4%. Once you put in these details into the mortgage calculator, you can start estimating your savings on each mortgage. The mortgage calculator will show you that with a fixed rate loan, you will be paying 734.18 monthly and no savings. On the one hand, the mortgage calculator will also show you that ARM loan will have you paying up to 663.67 monthly with cumulative savings up to 11,024.46.

Comparison Mortgage Calculators

As the name itself suggests, this mortgage calculator allows you to compare several mortgage types and find out what suits you best. You can put in variables to as much as four loans into this mortgage calculator and start comparing prices. By providing the number of payments to be made, interest rates, and principal amount, this mortgage calculator will calculate for you the projected monthly payment.

30 Year and 15 Year Mortgage Calculator

This mortgage calculator will help you decide which mortgage suits your needs 30 year or a 15 year term. For instance, youre considering a 100,000 loan. For 15 years, the interest rate is 6.250%. For a 30-year term, the interest will increase slightly to 6.500%. Discount points for each are equal at 1%.

For more accurate results on this mortgage calculator, lets put in a state/federal tax rate of 38%, property tax amount of 2,000, homeowners insurance of 600, and savings rate of 4%. The purchase price of the home is 125,000. The result generated by the mortgage calculator will be a total payment of 1,074 for the 15-year term and 849 for the 30-year term.