Is It Time to Refinance?

By Kat DeLong

Yes, mortgage rates are going up, and yes, lenders have made it more difficult for borrowers to get loans. This may continue for some time to come, but does that mean you shouldn't try to refinance your home? Not necessarily. If you meet certain criteria, it can still be a great time to take advantage of historically low interest rates.

As rates start to climb, the mortgage applications begin to slow, but rates are still considerably low when you look at the history of 30-year fixed rate mortgages back in 1971.

If you have great credit and want to lower your monthly payments, refinancing might still be a good deal for you. So should you refinance? If any of these scenarios match you, it's worth considering:

• If you didn't put much down on your home, you probably pay PMI. Even though home values have dropped, long-time homeowners may have enough equity to refinance and drop the extra money they spend every month on this insurance.
• Because you have to figure in closing costs and other expenses, you only want to refinance if it will make enough of a monthly difference. If your current rate is at least one point higher than the going interest rate (and especially if it two percent higher), then consider this idea.
• You have an interest-only loan that builds no equity, a negative amortization loan or an adjustable rate loan, locking in low rates now can save you money and your sanity.
• As lenders shrink lines of credit and home values decrease, refinancing to get money out for tuition and other expenses will only work if you have good credit and significant equity in your home. Do the math carefully, as interest payments over time can cost more than taking out a standard short-term loan.
• Has your credit rating improved dramatically since you got your original mortgage? If your loan had a higher rate due to poor credit, you might be able to get a significantly lower rate now.
• If you can afford to refinance from a 30-year loan to a 15-year loan, you can save tens of thousands of dollars in interest over the life of the loan.

Your situation can change drastically over time, so reviewing your mortgage every few years can save you money in the long run. The economy may be tough, but refinancing options can help those who qualify.

Good luck! Refinancing could save you hundreds each month. Start Now!

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