Why is that? Because the Fed has attempted to stimulate economic growth with a series of rate cuts, leading lenders of mortgage loans to lower their interest rates as well. That can be excellent news for you, leading to much lower monthly payments and a lower overall cost for mortgage loans. If interest rates are now at least two percent lower than they were when you got your loan, now is the time to refinance.

But aren’t banks refusing to approve new mortgage loans? The answer is both yes and no. The mortgage applicant’s credit rating is the deciding factor. Banks are more wary than they have been about offering loans to borrowers with a poor credit rating, and they are using more stringent guidelines for deciding what constitutes a poor rating, but they are eager to draw in new lenders with good credit ratings. If your credit is good, then by all means, apply right away.

If your credit rating is slightly below the zone considered good, then there are a few simple steps you can take to raise it over the next six months. Pay all your bills on time scrupulously, putting them on automatic withdrawal if you can. The ratio of credit you have used to total credit you have available is important, so pay off as much as possible of your current loans and credit card balances. Ignore old advice to close down unused credit card accounts; leaving the accounts open increases the amount of credit available to you, improving your ratio of available credit to used credit. Be especially wary of closing very old accounts, since doing so could shorten your credit history, which you want to be as long as possible. If you take these steps, pay on time for the next half year, and do not take on any new debts (credit card, car loan, etc.), then over the next several months you should see your credit score rise.

As you can see, a crisis in the credit markets can be the perfect time to refinance or to apply for new mortgage loans. Be the attractive would be mortgage holder the banks want to see, and you can get a markedly lower interest rate on mortgage loans. If you are what the banks are looking for, you can indeed benefit from even the worst credit crunch.

* Amortizing: “Amortizing” means that the loan is fully paid at the end of the loan term, and the payments are designed to be roughly the same amount for the duration of the loan. Each of the payments of an amortizing loan cover both part of the principal and all of the accrued interest.

* Non amortizing: A non amortizing loan’s payments do not pay off the loan gradually. For instance, a popular type of non amortizing mortgage called a balloon mortgage requires payments that cover only the accrued interest, or may even require that only part of the accrued interest is paid. At the end of the balloon mortgage’s term, the full sum of the mortgage is due, usually as a lump sum.

* Variable rate: The interest rates for mortgage loans with variable interest rates rise and fall with the market. Variable rate loans are good for periods in which interest rates are high, but are expected to drop. Many variable rate loans have a grace period during which the homeowner can convert from a variable rate to a fixed rate loan in order to take permanent advantage of a dip in interest rates.

* Fixed rate: A fixed rate does not change over the life of the loan. Mortgage loans with fixed rates have payments of equal amounts from the beginning to the end of the term of the loan. Fixed rate mortgages are best for when the prevailing interest rates are low and are expected to rise shortly. Fixed rate loans allow homeowners to lock in low interest rates during periods when markets are favorable, then enjoy the low interest rates when the prevailing rates rise.

* Points: Fees you pay for taking out a loan. One point is worth 1% of the value of the mortgage loan. Fees for legitimate mortgage loans should be under 5 points.

* Yield spread premium (YSP): A yield spread premium is a sum the lender pays the mortgage agent for convincing a client to sign a mortgage with a much higher interest rate than the client would normally have received. Legitimate lenders never append yield spread premiums, so if your contract contains a yield spread premium, the lender is trying to scam you.

The interest rate and monthly payment amount for fixed rate mortgages do not change over the course of the loan. Whatever rate you are given when you take out the loan, that is the rate you continue to pay until you refinance, sell the house, or pay off the home mortgage. You pay a premium for the certainty of a fixed payment since lenders usually charge slightly higher interest rates for a fixed rate home mortgage.

On the other hand, the interest rate for adjustable rate mortgages “adjusts” as national interest rates rise and fall. When the prime rate is high, your mortgage interest rate increases; when the prime rate is low, your mortgage rate drops. Your monthly payments rise and fall accordingly. Because banks have less risk with adjustable rate mortgages, they set the interest rate on this type of mortgage lower than they do for fixed rate loans. They also offer a grace period, typically 36 months to seven years, during which your interest rate does not fluctuate and is locked at an appealingly low rate.

Which type of loan should you choose? Do not immediately be tempted by the lower interest rates of adjustable rate mortgages. How long do you plan to stay in your house? Are rates likely to go any lower during your stay? If you are buying a house during a period of record high interest rates, an adjustable rate mortgage is an excellent idea, since it’s likely that rates will go down. If you plan to resell your house within the grace period of an adjustable rate mortgage, then opting for an adjustable rate mortgage would be an economical way to get a low cost, short term loan. However, if you plan to keep your house for longer than the introductory period, and interest rates are low, a fixed rate mortgage may be the best choice because you can “lock in” the prevailing low interest rate.

Take into account not only your own finances, but the current economic climate, when deciding what kind of home mortgage is right for you. Both kinds of home mortgage can offer you an excellent deal in the right economy.

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 is a significant enough sum that most people will recoup more in savings than they will pay in refinancing fees. However, your own situation may not fit the formula. 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.

Lowering your monthly payment is another reason to refinance mortgage loans. If you are pinched financially, cutting the amount you pour into your mortgage each month can reduce your stress significantly. 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. If you refinance mortgage loans via a loan that does not amortize, you pay only the accrued interest for a grace period of several years. At the end of the grace period, you must repay the capital at an accelerated pace, or may even need to pay it all off at once. However, refinancing or selling the property before the end of the grace period nets you much lower monthly payments, and you repay the remainder of the loan with the sale proceeds.

If your analysis tells you it’s time to refinance, mortgage interest rates are ideal. On the other hand, if your analysis suggests that you will not recoup your money, refinancing is a poor choice. Wait to refinance; mortgage interest rates will fall again. Either way, your own financial situation is the best and only guide to when it’s time to refinance.

A lot of experts in the industry anticipate that the low rates will persist in encouraging more applicants hoping to refinance mortgage loans than those wishing to take out loans for new properties. There are still many buyers who are not ready to invest in real estate when they are not sure when it will recover. Others are simply being cautious in the current economy and are hesitant to take on additional financial burdens like mortgage loans. Then, of course, some want to buy but cannot qualify for a home loan under the more restrictive lending standards. Consumers who currently own their homes and wish to refinance have to undergo the same scrutiny as new home buyers. In addition to needing higher credit scores to qualify, homeowners must now have higher amounts of equity to be eligible for a refinance. A large number of lenders now require equity of at least 20 percent. For homeowners who lost equity when real estate values dropped, this requirement can be frustrating. Those applicants who not long ago would have been able to refinance can no longer do it, because they cannot meet the equity requirements. That being said, there are a lot of homeowners who are eligible to refinance and are jumping at the chance to lock in a better mortgage interest rate than that of their original loan. After such dismal real estate times, many in the industry welcome any and all action in the real estate and loan industries, whether it is due to refinancing existing homes or purchasing new ones.

* Interest rates for mortgage loans are going up. They were low throughout the first half of 2009, but appear to be rising starting in July. It’s unlikely that interest rates will dip significantly lower and highly likely that their rise will continue, so if you want a low rate on your refinanced mortgage, you need to act now.

* 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.

* Be on the lookout for unscrupulous lender. The credit crunch is bringing out lenders whose unethical business practices are designed to catch desperate and inexperienced borrowers. Watch out for any mortgage you’re offered that has a yield spread premium or whose fees add up to more than 1% of the total. 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.

Right now is an ideal time to refinance mortgage loans. Rates are so low that they can only go higher, and bankers are eager to lend to borrowers with good credit. 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.

The Obama Administration has vowed to make the battered housing market a priority. And any stimulus plan will certainly try to stem the rate of home mortgage deliquencies. As the country anxiously awaits the specifics of the stimulus package, things such as incentives for banks to lower home mortgage bills are being discussed. The new President has made it clear that he would like to assist those in trouble before they become delinquent. It will be difficult task to determine who will qualify for assistance and who will not. If he meets the criteria, a borrower may get a lower interest rate on his home mortgage or defer the principal to the end of the term of the loan. A home mortgage foreclosure is more costly to a bank than a loan modification, so many banks are anxiously awaiting the details of how the $50 billion will be put to use to help the housing sector. Many lenders have, in fact, delayed additional home mortgage foreclosure actions pending the details of the new Obama plan.

Determining whether or not you should undergo a mortgage refinancing can be complicated. First, determine if you owe more on your mortgage than your property is worth. Some homeowners in areas hardest hit by plummeting values are in this situation. You will not be approved for mortgage refinancing if your current mortgage is higher than the value of your home. In fact, many lenders offering mortgage refinancing now make 20 percent equity requisite. If you pass the home equity test, move on to calculating the cost and benefits of mortgage refinancing.

The first step is to calculate how much you would save each month by comparing your original mortgage interest rate to the current rate. Add up all the fees you will incur by undergoing the mortgage refinancing. Much like you did when you obtained your original mortgage, you will incur costs for documentation work, appraisers, attorney hours and bank fees. Next, try to estimate how long you anticipate owning the property. Take the total cost of the mortgage refinancing and divide by the estimated monthly savings. This is referred to as the “break even point,” or how long it will take for you to begin to save on your monthly payments as a result of the mortgage refinancing. If it is more than the duration you plan to own the property, then mortgage refinancing is not advisable. On the other hand, mortgage refinancing may be a good decision if you will break even before you plan to sell the house.

There have been so many applications for mortgage refinancing that some analysts in the housing sector say that it is causing a tiny boom in real estate. It would be a larger one, they say, if new lending practices were not so tight and values were not so low. Value decreases have caused decreases in homeowner equity, and in some cases homeowners now own so little equity that they are not eligible for mortgage refinancing. In Ventura County in California, for example, it is estimated that of the properties purchased there within the last five years, about 40 percent are now worth less than their purchase prices. Other homeowners who may have been approved for mortgage refinancing just a year ago may not have a high enough credit score to qualify under the new lending practices. Some banks are now requiring a credit score of 700 or higher to be eligible for the low rate mortgages.

Many financial analysts believe that interest rates will remain low the next few months, since the federal government agreed to purchase $500 billion of mortgage backed securities in the hopes that it would spur lower lending rates and encourage consumers to take on new mortgages. It would be wise to get the ball rolling, if you are considering mortgage refinancing. Most financial advisers tell you that mortgage refinancing is a good decision if the rates are at least 1 percent below those of your original mortgage. In addition, you need to examine your own budget and goals to know if mortgage refinancing will be worth it to you for the time you plan to own the house. The first step is to figure out how much you would save each month with the new interest rate by subtracting the new estimated monthly payment from the one you make now. Tally up the actual mortgage refinancing costs, such as an appraisal, lawyer and documentation fees and other closing costs. Take that total and divide by what you think you will save each month. This total (given in months) will tell you when you will make up the costs of the refinance and start seeing savings each month, also known as when you will break even. If you plan to own the house beyond when you break even, then mortgaging refinancing should be considered.

The low interest rates will continue to entice consumers, particularly those looking to refinance. While many mortgage holders are grabbing the current round of low interest rates, others are waiting to see if the rates will drop further. Just as rates go down, rates can go up and you could miss a golden opportunity to refinance. Many financial experts think that if you are considering a refinance, it would be wise to take the current low rates. If you are wondering if a refinance makes sense for you, the simplest thing to do is calculate your savings and costs for the time you plan to hold the mortgage. Subtract the estimated new monthly payment from your current monthly payment to determine how much you would save each month under the new rate. Then, add up all the costs of the refinancing. Lastly, divide the total cost of the refinance by the monthly savings to figure out how many months it will take you to actually start saving on your monthly payments. That total number of months is known as the “break even point.” If you think you are going to sell the house before you reach that break even point, then you may not want to refinance. Say, for instance, your break even date would be 18 months from the time of your refinance. If you expect to sell the house in a year, then the refinance may not be a good financial move.

It is hard to predict what will happen with mortgage interest rates. If you plan to refinance, consider taking the opportunity to do so under the current low rates before they go up again.